ISSN 1977-0677

Official Journal

of the European Union

L 134

European flag  

English edition

Legislation

Volume 59
24 May 2016


Contents

 

II   Non-legislative acts

page

 

 

DECISIONS

 

*

Commission Decision (EU) 2016/788 of 1 October 2014 on the State aid SA.32833 (11/C) (ex 11/NN) implemented by Germany concerning the financing arrangements for Frankfurt Hahn airport put into place in 2009 to 2011 (notified under document C(2014) 6850)  ( 1 )

1

 

*

Commission Decision (EU) 2016/789 of 1 October 2014 on the State aid SA.21121 (C29/08) (ex NN 54/07) implemented by Germany concerning the financing of Frankfurt Hahn airport and the financial relations between the airport and Ryanair (notified under document C(2014) 6853)  ( 1 )

46

 

*

Commission Delegated Decision (EU) 2016/790 of 13 January 2016 amending Annex V to Directive 2005/36/EC of the European Parliament and of the Council as regards the evidence of formal qualifications and the titles of training courses (notified under document C(2016) 1)  ( 1 )

135

 


 

(1)   Text with EEA relevance

EN

Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.

The titles of all other Acts are printed in bold type and preceded by an asterisk.


II Non-legislative acts

DECISIONS

24.5.2016   

EN

Official Journal of the European Union

L 134/1


COMMISSION DECISION (EU) 2016/788

of 1 October 2014

on the State aid SA.32833 (11/C) (ex 11/NN) implemented by Germany concerning the financing arrangements for Frankfurt Hahn airport put into place in 2009 to 2011

(notified under document C(2014) 6850)

(Only the English text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) (1) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above (2) and having regard to their comments,

Whereas:

1.   PROCEDURE

(1)

By letter dated 17 June 2008, the Commission informed Germany of its decision to initiate the procedure provided for in Article 108(2) of the Treaty with regard to the financing of Flughafen Frankfurt Hahn GmbH (‘FFHG’), the operator of Frankfurt Hahn airport, and its financial relations with Ryanair. The formal investigation procedure was registered under the case number SA.21121 (C 29/08).

(2)

By letter of 4 March 2011, Deutsche Lufthansa AG (‘Lufthansa’) provided further information with regard to the ongoing formal investigation procedure in case SA.21121 (C 29/08), alleging new State aid measures in favour of FFHG.

(3)

By letter dated 18 March 2011 the Commission forwarded this submission of Lufthansa to Germany and requested further information on the alleged new State aid measures. By letter dated 5 April 2011, Germany requested an extension of the deadline for providing that information until 15 July 2011. By letter dated 11 April 2011 the Commission granted an extension of the deadline until 18 May 2011 for some of the questions and until 31 May 2011 for the remaining questions. Germany replied by letters dated 19 May 2011 and 23 May 2011.

(4)

However, those replies were incomplete. Therefore, by letter dated 6 June 2011 the Commission sent a reminder pursuant to Article 5(2) of the Council Regulation (EC) No 659/1999 (3). Germany responded by letters dated 14 June 2011 and 16 June 2011.

(5)

By letter dated 13 July 2011 the Commission informed Germany of its decision to initiate the procedure provided for in Article 108(2) of the Treaty with respect to the credit line provided to FFHG by the cash-pool of Land Rhineland-Palatinate, the loan provided by Investitions- und Strukturbank of Land Rhineland-Palatinate (‘ISB’) to FFHG and the guarantee provided by Land Rhineland-Palatinate to FFHG for the ISB loan (‘opening decision’). The formal investigation procedure concerning these aspects was registered under the case number SA.32833 (11/C).

(6)

By letter of 22 July 2011, Germany requested an extension of the deadline for its reply to the opening decision, which was accepted by the Commission on 26 July 2011. The Commission received comments on the opening decision from Germany on 31 August 2011.

(7)

By letter dated 22 December 2011 the Commission requested further information from Germany. By letter of 18 January 2012, Germany requested an extension of the deadline for replying, which was granted by the Commission on the same day. Germany responded to the request for further information dated 22 December 2011 by letter dated 22 February 2012.

(8)

The opening decision was published in the Official Journal of the European Union  (4) on 21 July 2012. The Commission invited interested parties to submit their comments on the measures in question within one month of the publication date.

(9)

By letter dated 4 September 2012, the Commission received one submission from a third party, Land Rhineland-Palatinate. The Commission transmitted that submission to Germany by letter dated 7 September 2012. Germany was given the opportunity to provide comments on the submission of the third party within one month. Germany did not provide any comments.

(10)

By letter dated 10 April 2013 the Commission requested further information from Germany. Germany responded by letter dated 17 June 2013.

(11)

By a letter dated 25 February 2014, the Commission informed Germany of the adoption of the 2014 Aviation Guidelines (5) on 20 February 2014, of the fact that those guidelines would become applicable to the case at hand from the moment of their publication in the Official Journal of the European Union, and gave Germany the opportunity to comment on the guidelines and their application within 20 working days of their publication in the Official Journal.

(12)

The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014. They replaced the 1994 Aviation Guidelines (6) as well as the 2005 Aviation Guidelines (7).

(13)

On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within one month of their publication date (8). Lufthansa and Transport & Environment submitted observations. By letter dated 21 August 2014 the Commission forwarded those observations to Germany. By letter dated 29 August 2014 Germany informed the Commission that it did not have any observations.

(14)

By letters dated 23 March 2014 and 4 April 2014 the Commission requested further information from Germany. Germany replied by letters dated 17 April 2014, 24 April 2014 and 9 May 2014.

(15)

On 17 June 2014, Germany informed the Commission that it exceptionally accepts that this Decision is adopted in English only.

2.   CONTEXT OF THE INVESTIGATION

2.1.   Conversion of the airport and its ownership structure

(16)

Frankfurt Hahn airport is located in Land Rhineland-Palatinate, approximately 120 km west of the city of Frankfurt/Main. Frankfurt Hahn airport was a US military airbase until 1992. Subsequently, it was converted into a civil airport. It holds a 24-hour operating licence.

(17)

Holding Unternehmen Hahn GmbH & Co. KG (Holding Hahn), a public-private partnership between Wayss & Freytag and Land Rhineland-Palatinate, acquired ownership of the infrastructure of Frankfurt Hahn airport from Germany on 1 April 1995. Between 1995 and 1998, this public-private partnership developed the airport with the goal of making it an industrial and commercial area. According to Germany, when the partnership between Wayss & Freytag and Land Rhineland-Palatinate did not turn out to be successful, on 1 January 1998, Flughafen Frankfurt/Main GmbH (Fraport) (*) started getting involved in the project and eventually took over the operation of the airport.

(18)

Fraport purchased 64,90 % of the shares in the operator Flughafen Hahn GmbH & Co. KG Lautzenhausen (FFHG) for the price of […] (9). Payment of part of the purchase price (EUR […]) was due on 31 December 2007, and was subject to certain conditions (10). In August 1999, Fraport acquired 73,37 % of the shares of Holding Hahn and 74,90 % of the shares of its general partner Holding Unternehmen Hahn Verwaltungs GmbH for the price of EUR […]. Thereby Fraport effectively became the new partner of Land Rhineland-Palatine.

(19)

Fraport's focus at Frankfurt Hahn airport was to systematically develop the passenger and cargo business of the airport. In this respect, Fraport was one of the first undertakings to apply a business model which aimed especially at attracting low-cost airlines. On this basis, Fraport undertook to conclude a new profit and loss transfer agreement with Holding Hahn upon conversion of the latter into a German limited liability company (Gesellschaft mit beschränkter Haftung, GmbH). The conversion and the conclusion of that agreement took place on 24 November 2000.

(20)

Subsequently, Holding Hahn and FFHG merged to form Flughafen Hahn GmbH. Land Rhineland-Palatinate held 26,93 % and Fraport 73,07 % of the shares in the new company. In 2001, the two shareholders, Fraport and Land Rhineland-Palatinate, injected fresh capital into FFHG.

(21)

Until 11 June 2001, 100 % of the shares in Fraport were held by public shareholders (11). On 11 June, Fraport was floated on the stock market exchange and 29,71 % of its shares were sold to private shareholders, the remaining 70,29 % of shares remaining with the public shareholders.

(22)

In November 2002, Land Rhineland-Palatinate, Land Hesse, Fraport and FFHG concluded an agreement on the further development of Frankfurt Hahn airport. That agreement provided for a second increase of the registered capital. On that occasion, Land Hesse acceded to FFHG as a third shareholder. Fraport then owned 65 % of the shares and Land Hesse and Land Rhineland-Palatinate held 17,5 % each. This ownership structure remained unchanged until 2009, when Fraport sold all of its shares to Land Rhineland-Palatinate, which has, since then, held a 82,5 % majority share. The remaining 17,5 % are still held by Land Hesse.

2.2.   Passenger and freight traffic development and airports in the vicinity

(23)

The passenger traffic at Frankfurt-Hahn airport increased from 29 289 in 1998 to 4 million in 2007 and then decreased to 2,7 million in 2013 (see Table 1). The airport is currently served by Ryanair (12), Wizz Air (13) and other airlines. Ryanair's passenger share amounts to approximately [80-100 %].

Table 1

Passenger development at Frankfurt Hahn airport from 1998 to 2013

Year

Number of passengers

Number of Ryanair passengers

1998

29 289

0

1999

140 706

89 129

2000

380 284

318 664

2001

447 142

397 593

2002

1 457 527

1 231 790

2003

2 431 783

2 341 784

2004

2 760 379

2 668 713

2005

3 079 528

2 856 109

2006

3 705 088

3 319 772

2007

4 015 155

3 808 062

2008

3 940 585

3 821 850

2009

3 793 958

3 682 050

2010

3 493 629

[2 794 903 -3 493 629 ]

2011

2 894 363

[2 315 490 -2 894 363 ]

2012

2 791 185

[2 232 948 -2 791 185 ]

2013

2 667 529

[2 134 023 -2 667 529 ]

(24)

Frankfurt-Hahn airport has also experienced a significant growth in air cargo traffic. The air freight at the airport increased from 16 020 tonnes in 1998 to 286 416 tonnes in 2011 and decreased again to 152 503 tonnes in 2013 (see Table 2). The total freight, including freight forwarders, handled at the airport amounted to 446 608 tonnes in 2013.

Table 2

Cargo development at Frankfurt Hahn airport from 1998 to 2010

Year

Total air freight in tonnes

Total freight including freight forwarders in tonnes

1998

16 020

134 920

1999

43 676

168 437

2000

75 547

191 001

2001

25 053

133 743

2002

23 736

138 131

2003

37 065

158 873

2004

66 097

191 117

2005

107 305

228 921

2006

123 165

266 174

2007

125 049

289 404

2008

179 375

338 490

2009

174 664

322 170

2010

228 547

466 429

2011

286 416

565 344

2012

207 520

503 995

2013

152 503

446 608

(25)

The following airports are located in the proximity of Frankfurt Hahn airport:

(i)

Frankfurt Main airport (~ 115 kilometres from Frankfurt Hahn airport, ~ 1 hour 15 minutes travelling time by car) is an international hub airport with a wide variety of destinations, ranging from short- to long-haul. It is predominantly served by network carriers offering connecting traffic, although it also provides point-to-point connections and charter flights. Besides passenger traffic (approximately 58 million in 2013), Frankfurt Main airport also handles air freight (approximately 2 million tonnes in 2013). Figure 1 shows the development of traffic at Frankfurt Main and Frankfurt Hahn airports in 2000-2012.

(ii)

Luxembourg airport (~ 111 kilometres from Frankfurt Hahn airport, ~ 1 hour 30 minutes travelling time by car) is an international airport, providing a wide variety of destinations. In addition to passenger traffic (approximately 2,2 million), it also served 673 500 tonnes of air freight in 2013.

(iii)

Zweibrücken airport (~ 128 kilometres from Frankfurt Hahn airport, ~ 1 hour 35 minutes travelling time by car).

(iv)

Saarbrücken airport (~ 128 kilometres from Frankfurt Hahn airport, ~ 1 hour 35 minutes travelling time by car).

(v)

Köln-Bonn airport (~ 175 kilometres from Frankfurt Hahn airport, ~ 1 hour 44 minutes travelling time by car).

Figure 1

Passenger traffic development at Frankfurt Main and Frankfurt Hahn airports in 2000-2012

Image

2.3.   Airport's financial results and an overview of investments undertaken

(26)

Table 3 provides an overview of investments undertaken by FFHG from 2001 to 2012, amounting in total to approximately EUR 216 million.

Table 3

Overview of investments undertaken from 2001 to 2012

In 1 000 EUR

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Total 2001-2012

Investments into infrastructure and equipment

Anlagenzugänge inkl. Umbuchungen

Land

3 174,00

6 488

 

2 994

4 284

3 086

8 613

593

 

[…]

 

 

 

Terminal

 

2 519

3 310

 

 

 

 

251

 

 

 

 

 

Cargo Hangar

 

 

3 850

 

3 222

 

 

 

 

 

 

 

 

Office building

 

 

 

 

 

 

 

2 428

 

[…]

 

 

 

Other infrastructure investments

 

 

10 194

1 152

 

 

13 275

 

 

[…]

[…]

[…]

 

Apron

1 008,30

5 684

 

 

3 394

 

10 224

2 848

 

[…]

[…]

 

 

Other infrastructure

1 502,20

3 848

2 071

2 692

3 911

1 761

1 558

2 608

384

[…]

[…]

[…]

 

Immaterial assets (e.g. IT)

6,1

14,50

28

219

487

45

170

121

20

[…]

[…]

[…]

7 108

Equipment

8 208,89

1 097,09

12 308,42

1 814,00

2 294,54

20 232

7 550

3 823

359

[…]

[…]

[…]

75 550

Total

13 899

19 650

31 761

8 871

17 592

25 123

41 390

12 673

763

17 289

19 346

7 930

216 287

(27)

Table 4 provides an overview of the annual financial results of FFHG from 2001 to 2012.

Table 4

Annual financial results of FFHG in 2001 to 2012

In 1 000 EUR

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Profit and loss statement

Revenues

10 077,61

14 908,11

22 574,22

29 564,18

36 859,08

43 479,85

41 296,34

45 383,60

42 036,70

43 281,58

43 658,38

40 983,45

Other revenues (including compensation for public policy remit)

7 771,31

5 514,63

3 686,87

3 039,35

3 618,93

6 097,29

5 436,58

4 858,16

11 540,36

14 554,55

9 313,99

21 390,92

Total Revenue

17 848,92

20 422,75

26 261,09

32 603,53

40 478,01

49 577,14

46 732,92

50 241,76

53 577,06

57 836,14

52 972,37

62 374,37

Costs of material

– 7 092,39

– 10 211,13

– 12 560,46

– 14 601,17

– 17 895,97

– 24 062,81

– 22 491,85

– 25 133,61

– 24 979,59

– 27 650,17

– 20 017,99

– 21 871,65

Costs of personnel

– 9 185,12

– 9 672,37

– 10 734,62

– 11 217,21

– 12 101,84

– 13 337,28

– 14 433,17

– 15 758,34

– 15 883,08

– 17 893,60

– 18 228,23

– 18 349,10

Other costs (including marketing)

– 5 692,81

– 11 434,31

– 10 521,27

– 11 454,36

– 14 058,15

– 12 885,28

– 9 897,46

– 9 630,21

– 7 796,81

– 8 029,40

– 6 760,92

– 6 643,00

EBITDA

– 4 121,41

– 10 895,06

– 7 555,27

– 4 669,21

– 3 577,94

– 708,22

– 89,56

– 280,39

– 4 917,58

– 4 262,96

– 7 965,23

– 15 510,62

EBITDA (excl other revenues)

– 11 892,72

– 16 409,69

– 11 242,13

– 7 708,56

– 7 196,87

– 6 805,51

– 5 526,13

– 5 138,56

– 6 622,78

– 10 291,59

– 1 348,76

– 5 880,30

Depreciation

– 5 325,63

– 5 674,68

– 6 045,39

– 7 699,33

– 7 973,46

– 10 527,90

– 10 191,89

– 11 855,19

– 12 482,28

– 11 827,19

– 13 297,31

– 12 733,48

Financial results (interest received — interest paid)

– 2 896,64

– 3 013,42

– 4 006,57

– 4 105,53

– 4 548,42

– 4 588,16

– 5 235,30

– 5 693,02

– 4 915,39

– 2 778,06

– 5 063,04

– 8 177,54

Extraordinary revenues and costs

– 431,54

– 206,00

– 10,46

0,00

0,00

0,00

0,00

0,00

0,00

– 272,55

0,00

0,00

Taxes

– 580,13

– 204,74

– 215,18

– 323,82

– 228,44

– 242,33

– 245,00

– 238,66

– 257,45

– 240,85

– 231,03

– 277,52

Coverage of losses by Fraport trough the profit and loss transfer

13 355,35

19 993,90

17 832,87

16 797,89

16 328,26

16 066,61

15 761,75

18 067,26

5 621,37

0,00

0,00

0,00

Annual result (profit/loss)

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

– 7 114,17

– 10 855,69

– 10 626,14

– 5 677,92

3.   DESCRIPTION OF THE FACTS AND GROUNDS FOR INITIATING THE PROCEDURE

(28)

The opening decision covers financing arrangements put into place in 2009 to 2011 and raised the following questions:

(i)

first, whether the credit line provided by the cash-pool of Land Rhineland-Palatinate was provided at market conditions and thus did not constitute State aid, or if it did constitute State aid, whether such State aid could be considered compatible with the internal market;

(ii)

second, whether the loans provided by ISB to FFHG and the underlying guarantee provided by Land Rhineland-Palatinate to FFHG were granted at market conditions, and thus did not constitute State aid, or if they did constitute State aid, whether such State aid could be considered compatible with the internal market.

3.1.   Credit line provided by the cash-pool of Land Rhineland-Palatinate

(29)

Since 19 February 2009 FFHG has been included in the cash-pool of Land Rhineland-Palatinate. The aim of the cash-pool is to optimise the use of liquidity within the different holdings, foundations and public undertakings of the Land.

(30)

The participation of the different undertakings and foundations in the cash-pool is based on a Memorandum of Understanding between the undertaking/foundation concerned and the Ministry of Finance of Land Rhineland-Palatinate. In the event that the liquidity demand exceeds the available funds within the cash-pool, the liquidity gap is financed on short-term basis on the capital market.

(31)

The current credit line for FFHG in the cash-pool of Land Rhineland-Palatinate is EUR 45 million. By 25 March 2013, FFHG had used 100 % (EUR 45 million) of its credit line.

3.2.   Refinancing of FFHG's loans by the Investitions- und Strukturbank of Land Rhineland-Palatinate

(32)

After Land Rhineland-Palatinate became the majority shareholder of FFHG, its long-term loans were refinanced in 2009 by ISB. Three of the loans, namely loans numbers 1, 3 and 4 (see Table 5) were granted at a fixed interest rate for the whole duration of the respective loans, while loans numbers 2 and 5 have a variable interest rate. Table 5 summarises the conditions of the loans provided by ISB.

Table 5

FFHG's loans provided by ISB

No

Bank

Loan amount in EUR million

Duration

Interest rate

Interest Swap

1

ISB

18,4

[approx. 8 years]

[> 3 %; < 4,5 %]

 

2

ISB

20,0

[approx. 5 years]

[< 12] month EURIBOR plus [< 1 %]

[…]

3

ISB

2,5

[approx. 2 years]

[> 3 %; < 4,5 %]

 

4

ISB

25,9

[approx. 7 years]

[> 3 %; < 4,5 %]

 

5

ISB

6,8

[approx. 3 years]

[< 12] month EURIBOR plus [< 1 %]

[…]

(33)

FFHG has also signed two interest rate swap agreements with IKB Corporate Lab. The agreements hedge against fluctuations of the variable part of the interest rate of loans numbers 2 and 5 (see Table 5), namely the 6-month and the 3-month Euribor respectively. The swap agreements were signed in 2004 and 2005 (in relation to the loans provided at that time, which the current financing replaced).

(34)

The repayment conditions of the various loans provided by ISB differ. Loans numbers 1, 3, 4 and 5 are amortising loans, while loan number 2 is a bullet loan repaid at maturity. Table 6 summarises the repayment conditions of those loans.

Table 6

Repayment conditions of the ISB loans

No

Bank

Loan amount in EUR million

Repayment conditions/due date

1

ISB

18,4

Semi-annual repayment on 30 June and 30 December of every year, last repayment rate due on […]

2

ISB

20,0

Bullet loan due on […]

3

ISB

2,5

Semi-annual repayment on 30 April an 30 October of every year, last repayment rate due on […]

4

ISB

25,9

Semi-annual repayment on 30 June and 30 December of every year, last repayment rate due on […]

5

ISB

6,8

Quarterly repayment of […], last repayment rate due […]

(35)

All the loans are 100 % guaranteed by Land Rhineland-Palatinate. For the provision of the guarantees FFHG pays a guarantee premium of [0,5 % to 1,5 %] per annum (‘p. a.’) to the guarantor.

3.3.   Compatibility of possible State aid to FFHG

(36)

In the opening decision, the Commission expressed doubts as to whether the credit line provided by the cash-pool of Land Rhineland-Palatinate mentioned in Section 3.1 and the loans and guarantee mentioned in Section 3.2 would be compatible with the internal market in the absence of the compatibility conditions for operating aid under the 2005 Aviation Guidelines, if they constituted State aid.

4.   COMMENTS FROM GERMANY

(37)

Generally, Germany asserted that neither of the two measures investigated in this procedure constitutes State aid within the meaning of Article 107(1) of the Treaty as there was no economic advantage conferred on FFHG taking into account all relevant circumstances. Alternatively, Germany argued that should the Commission consider that these measures do constitute aid within the meaning of the Treaty, then the aid should be deemed compatible with the internal market.

4.1.   The specific situation of Frankfurt-Hahn Airport in 2009

(38)

Germany considered that the specific situation of the airport and background of the financial measures concerned must be taken into account when assessing these financial measures concerned. In this regard Germany referred to the following three circumstances:

(39)

Firstly, concerning the background of the measures, Germany pointed out that FFHG had financed the majority of its investments during and after the transformation from a military airport to a commercial airport through loans. According to Germany, FFHG therefore had a large amount of long-term financial obligations, unlike other airports.

(40)

Secondly, Germany argued that a refinancing of FFHG's loans was inevitable because Fraport had sold its shares to the Land Rhineland-Palatinate as of 1 January 2009. Before the sale, the profit-and-loss transfer agreement (‘Beherrschungs- und Gewinnabführungsvertrag’, PLTA) obliged Fraport to ensure the financing of the long-term debts of FFHG and to cover its possible losses. Germany explained further that after Land Rhineland-Palatinate had acquired the shares, that PLTA was ended, so a refinancing of FFHG's obligations was necessary. According to Germany, with these measures Land Rhineland-Palatinate only aimed at maintaining the financial situation of FFHG.

(41)

Thirdly, Germany emphasised especially the fact that a private undertaking would have financed FFHG under the same conditions as the Land Rhineland-Palatinate did and that those conditions are in line with the market economy lender principle. Germany submitted that the Commission has to take into account the commercial transaction as a whole and all the circumstances of the particular case, especially the fact that the Land holds the vast majority of the shares.

4.2.   Aid nature of the credit line provided by the cash-pool of Land Rhineland-Palatinate

4.2.1.   The funding of the cash-pool

(42)

Germany stated that the cash-pool is a financial instrument established in 2002 by the Land. The Land's institutions and foundations and all undertakings governed by private law, of which the Land owns more than 50 %, can participate in the cash-pool. Germany explained that the daily account balance of the cash-pool is managed by the ‘Landeshauptkasse’ of the Land.

(43)

Germany considered that the cash-pool is not financed directly out of the budget of the Land, but from the surplus of cash of the participants. It explained further that a surplus of cash in the cash pool was invested on the capital markets; in the same way, a deficit is balanced by funds obtained on the capital market. Thus, Germany asserted that any financial support from the cash-pool would not be granted through state resources, and would also not be imputable to the state.

(44)

Germany also provided data to show the overall balance (deposits of participating undertakings and drawn credit lines) of the cash-pool as summarised in Figure 2.

Figure 2

Overall development of the funding of the cash-pool of the Land 2009-2013 (in EUR million)

Image

4.2.2.   Economic advantage

(45)

Germany argued that FFHG did not obtain an economic advantage within the meaning of Article 107(1) of the Treaty by being included in the cash-pool of the Land. According to Germany, the Reference Rate Communication (14) should not be applied in a strict manner as it does not take into account that Land Rhineland-Palatinate holds the vast majority of the shares of FFHG.

(46)

Germany explained that even though the credit line was granted for a longer period, in principle the loans are due on a daily basis. Hence Germany argued that the drawn credit line corresponds to a short-term loan. Figure 3 shows the use of the credit line by FFHG.

Figure 3

Overview of the drawing on the credit line of the cash-pool by FFHG between 3/2009 and 8/2013 (in EUR)

Image

(47)

With regard to the ranking and collateralisation of the cash-pool obligations, Germany stated that the FFHG's cash-pool obligation is ranked at the same level as all its other obligations. Germany pointed out that even though no collaterals are required from the undertakings benefiting from the cash-pool, they are under the Land's supervision and the Land could always request as majority shareholder of FFHG to collateralise the drawn loans. Moreover, Germany pointed out that cash-pool facilities were a usual and a very common market practice. In Germany's view, the cash-pool pursues the goal of balancing the liquidity between the companies owned by the Land.

(48)

Particularly with regard to the indication in the opening decision that in absence of a rating the risk margin should have been set at 1 000 basis points, Germany argued that in its opinion no private holding would add 1 000 basis points to the base lending rate for a shareholder loan granted to its subsidiary if it pursued the economic and structural interests of a holding. Germany added that the interest rate for FFHG corresponded approximately to the European overnight index average. Figure 4 shows the interest rate charged for FFHG for the use of the credit line in 2012 and 2013.

Figure 4

Development of the interest rate charged to FFHG for the drawing on the cash-pool in 1/2012-8/2013

Image

(49)

As regards the indication in the opening decision that the risk margin would normally be set on the basis of an assessment of the probability of default by FFHG, Germany pointed out that by including FFHG in the cash-pool, the Land Rhineland-Palatinate did not grant a loan to a third party, but offered a shareholder loan to its own subsidiary. Germany further stated that, as a shareholder, the Land was well aware of the probability of default by FFHG and did not require an external assessment, as it had all the necessary information.

(50)

Germany also provided ratings of FFHG established on the basis of Moody's credit-scoring model (15) for the period 2009 to 2014, as summarised in Table 7 below. Germany stated that these ratings were established on the basis of the financial statements of FFHG per 31 December of the preceding year and the available business plans.

Table 7

Overview of the credit ratings of FFHG in 2009 to 2014

Period of time

Assumed duration (16)

Stand-alone credit rating of the FFHG

(Moody's rating scale)

Adjusted credit rating (17)

(Moody's rating scale)

1 January 2009-31 December 2010

2 Years

[Ba1-B3] (18)

[Baa3-B2] (19)

1 January 2011-31 December 2011

1 Year

[Ba1-B3] (18)

[Baa3-B2] (19)

1 January 2012-31 December 2012

1 Year

[Ba1-B3]

[Baa3-B2]

1 January 2013-31 December 2014

2 Years

[Ba1-B3]

[Baa3-B2]

(51)

Consequently, Germany submitted that by being included in the cash-pool of the Land, FFHG did not obtain any economic advantage, and that therefore the access to the cash-pool did not constitute State aid.

4.3.   Aid nature of the loans and the guarantee granted to FFHG

4.3.1.   Market conformity of ISB loans

(52)

Germany stated that FFHG did not obtain any advantage from the refinancing of the ISB loans. In Germany's opinion, the ISB loans were comparable to the loans granted by Nassauische Sparkasse in 2005. According to Germany, the collateralisation of the ISB loans was also comparable to the loans of Nassauische Sparkasse.

(53)

Germany stated that, according to the case-law of the Court of Justice (20), aid is defined as interventions that mitigate the charges which are normally included in the budget of an undertaking. Germany argued that if those charges stay at the same level, there cannot be any aid. Germany highlighted that the interest paid under the loans refinanced by ISB was in total [EUR 80 000 to EUR 130 000] higher than compared to the previous financing arrangements. In addition, Germany pointed out that FFHG had to pay a premium of [300-340] and [340-410] basis points to the base lending rate. Germany stated that, according to the Reference Rate Communication, those rates correspond to an undertaking with a satisfactory rating ([BB+ to BB-] on Standard and Poor's rating scale) and a low level of collateralisation or weak rating ([B+ to B-] on Standard and Poor's rating scale) and a normal level of collateralisation.

(54)

Germany explained that in 2009, in preparation of the new financing, FFHG commissioned Deutsche Bank to provide a risk margin indication for the refinancing of its existing loans. Germany submitted the assessment of Deutsche Bank (21), which had been prepared on the basis of the three latest annual reports (2006-2008) of FFHG. Furthermore, Germany explained that that assessment did not take into account the business plan of FFHG as it was reviewed at the time. With regard to the assessment of Deutsche Bank, Germany stated that on the basis of its analysis Deutsche Bank puts FFHG in the [<BBB+] rating category (22), however it does not specify an exact rating for the company.

(55)

Germany clarified that in the analysis of Deutsche Bank the specific ownership conditions of FFHG (such as that it is owned by public authorities as well as the high importance of the company for the local economy) were taken into account. Germany pointed out that according to Deutsche Bank any lender would take into account these circumstances when providing a loan to FFHG. According to Germany this means that even though the stand-alone rating of FFHG was [<BBB+], its adjusted rating (taking into account the specific ownership conditions) would be higher (23).

(56)

In this regard, Germany clarified further that Deutsche Bank has provided an indication for the applicable risk margin for two alternative financing structures — one based on the adjusted rating of FFHG (without collateral, that is to say, referring to a situation without an explicit state guarantee provided by the main shareholder of FFHG — the Land Rhineland-Palatinate), and one with a 100 % guarantee provided by the Land Rhineland-Palatinate. Germany pointed out that the analysis of Deutsche Bank showed that in the first case (without collateral, based on the adjusted credit rating) the applicable risk margin for a 5-year loan would be between [1,3 % and 2,05 %] p.a. According to Germany, in the second case (with a guarantee covering 100 % of the loans) the applicable risk margin would be between [0,25 % and 0,7 %] p.a. (24).

(57)

To support the analyses conducted by Deutsche Bank, Germany also provided the 2010 rating prepared by Volksbank, which assigned FFHG a rating of […] according to its internal rating scale (25). Furthermore, Germany explained that in 2011 Kreisspaarkasse Birkenfeld assigned FFHG a rating of […] according to its rating scale (26).

(58)

Germany also provided ratings of FFHG established on the basis of Moody's credit-scoring model at the time the ISB loans were granted (see Table 8).

Table 8

Overview of the credit ratings of FFHG at the time the ISB loans were granted

Bank

Duration

Duration in years

Stand-alone credit rating of FFHG

(Moody's rating scale)

Adjusted credit rating (27)

(Moody's rating scale)

ISB

[approx. 8 years]

[approx. 8 years]

[B2-Baa3]

[B1-Baa2]

ISB

[approx. 5 years]

[approx. 5 years]

[B2-Baa3]

[B1-Baa2]

ISB

[approx. 2 years]

[approx. 2 years]

[B2-Baa3]

[B1-Baa2]

ISB

[approx. 7 years]

[approx. 7 years]

[B2-Baa3]

[B1-Baa2]

ISB

[approx. 3 years]

[approx. 3 years]

[B2-Baa3]

[B1-Baa2]

(59)

Germany argued that FFHG is to be considered as an undertaking with a good rating because it has a high level of collateralisation (all assets of FFHG could be used as collateral) and a good equity-ratio of around 30 % despite the fact that FFHG has been loss-making and because Land Rhineland-Palatinate — as shareholder of FFHG — provided a guarantee for the loan.

(60)

In addition, Germany stressed that FFHG and ISB negotiated the conditions of the loans and that those negotiations were not influenced by the Land Rhineland-Palatinate.

(61)

Consequently, Germany was of the opinion that the ISB loans granted to FFHG were on market terms, and that, therefore, those loans do not constitute State aid.

4.3.2.   Market conformity of the guarantee granted by Land Rhineland-Palatinate

(62)

Germany stated that it is very common for holding companies to guarantee financial obligations of their subsidiary. Moreover, Germany argued that the guarantee by Land Rhineland-Palatinate meets the requirements of the guarantee notice (28). Admitting that the guarantee collateralised 100 % instead of 80 % of the loan amount (as the guarantee notice requires), Germany pointed out that this is due to the fact that Land Rhineland-Palatinate took over the guarantees of Fraport which also amounted to 100 %. In this regard, Germany stated that as a collateralisation of 100 % existed before, by taking over the collateralisation, Land Rhineland-Palatinate only maintained the status quo. Thus, in Germany's opinion, FFHG did not receive any economic advantage.

(63)

In addition to that, Germany submitted that FFHG could have offered other collaterals (such as land property, buildings and other fixed assets), which were not necessary because the Land held the vast majority of the shares of FFHG. Therefore, Germany asserted that the conditions of the loan would not necessarily have altered if the Land had not granted a guarantee.

(64)

Furthermore, Germany pointed out that FFHG pays a market fee for the guarantee. To support this, Germany referred to the Deutsche Bank study, as mentioned in recital 56. In this context, Germany clarified that Deutsche Bank determined that the guarantee fee would be between [0,5 % and 1,5 %] (29). Germany stated that because FFHG was developing well when the guarantee was issued, the fee was set at [0,5 % to 1,5 %]. Against this background, Germany pointed out that, as this guarantee fee is within the margin determined by the Deutsche Bank expertise, it must be considered as being in line with the market.

(65)

In conclusion, Germany emphasised that FFHG did not receive an economic advantage within the meaning of Article 107(1) of the Treaty either through the cash-pool or through the ISB loans or through the underlying guarantee.

4.4.   Compatibility of the measures with the internal market

4.4.1.   Assessment of compatibility of the investment aid

(66)

Germany submitted that, even if the financing provided to FFHG constitutes aid, that aid would be compatible with the internal market under the Article 107(3)(c) of the Treaty.

(67)

In particular with regard to the ISB loans and the underlying guarantee, Germany asserted that the ISB loans refinanced existing loan agreements which were concluded with the aim of financing infrastructure measures at Frankfurt Hahn airport. In this regard, Germany submitted that the ISB loan No 1 refinanced a loan that was intended to finance the 2007 and 2008 investments into the equipment of Frankfurt Hahn airport, whereas the ISB loan No 2 was intended to refinance a loan financing investments conducted at the airport in 2002. According to Germany, the ISB loan No 3 also refinanced investments in the transformation of a cargo hangar into a passenger terminal and other infrastructure extension measures. Germany further submitted that the ISB loans Nos 4 and 5 also refinanced loans financing investments in 2004 to 2006. Thus, Germany argued that the loans do not constitute operating aid, but investment aid that complies with the compatibility conditions set out in the 2005 Aviation Guidelines. The following recitals contain the analysis of compliance with each of those conditions.

(a)   Contribution to a well-defined objective of common interest

(68)

As regards the condition that the measure must contribute to a well-defined objective of common interest, Germany submitted that the objective of the financing of airport infrastructure at Frankfurt Hahn airport was always to improve the economic structure of the economically underdeveloped and scarcely populated Hunsrück region.

(69)

In this regard, Germany stated that, firstly, the objective of supporting FFHG was to help overcome the weak structural economy of the Hunsrück region. Germany asserted that Frankfurt Hahn airport is surrounded by a number of areas considered as regions in need of support within the framework of Gemeinschaftsaufgabe ‘Verbesserung der regionalen Wirtschaftsstruktur’  (30), a task shared by the federal and local governments. In this regard, Germany submitted that the four regions around the airport, namely Landkreis Bernkastel-Wittlich, Birkenfeld, Cochem-Zell and Rhein-Hunsrück-Kreis, are on average only half as densely populated as the rest of Land Rhineland-Palatinate. Germany pointed out that for those districts whose economy is shaped by small and medium-sized enterprises, employment is the main anchor against a further decrease of the regional economy and Frankfurt Hahn airport plays an important role as an employer and client.

(70)

Secondly, Germany argued that Frankfurt Hahn airport plays an important role in the strategic development of incoming (~ 33 % of passengers corresponding to approximately 1 million passengers in 2005) and outgoing tourism (~ 67 % of passengers) for the Land Rhineland-Palatinate. Germany stated that 88 % of the incoming passengers are staying several nights in the region. Germany submitted that the Frankfurt Hahn airport's incoming tourists generated approximately 5,7 million overnight stays in 2005 (31). According to Germany the number of overnight stays further increased, Land Rhineland-Palatinate welcomed 8,2 million guests in 2011, which generated 21,5 million overnight stays. Germany pointed out that the number of guests from eastern and southern European countries, in particular, has increased and that a large number of flights are operated from those countries to Frankfurt Hahn. This has resulted in about 198 000 jobs being generated by tourism in Rhineland-Palatinate, according to Germany. The catalysed income and employment effects stem especially from incoming tourism, in which Frankfurt Hahn airport plays a central role as the gateway for tourists into the Hunsrück region, but also into Rhineland-Palatinate more generally, as Germany explained. Germany stated that between 1990 and 2001 the number of tourists has increased by 70 % for the Hunsrück region and by 35 % for Rhineland-Palatinate. According to Germany, during the same period, the number of tourists coming from abroad has increased by 163 % in the Hunsrück region. Since 88 % of incoming tourists from Frankfurt Hahn stay at least one night and more than 80 % of those even stay two to 10 days, they generate a total benefit of about EUR 133,7 million per year. Furthermore, Germany argued that outgoing tourism (67 %) also generates income for Frankfurt Hahn airport through non-aeronautical revenues.

(71)

Thirdly, Germany stated that, taking into account all parts of the airport activities, Frankfurt Hahn airport created 3 063 jobs in the Hunsrück region in 2012 out of which 74 % were full-time positions. According to Germany, 90 % of those employees also live in the region. Germany argued that Frankfurt Hahn airport helps to prevent the movement of young, qualified employees towards other regions as well as an economic and social decline of the regional communities and their infrastructure. Furthermore, Germany pointed out that the presence of Frankfurt Hahn airport not only produces the aforementioned direct effects for the labour market, but also has enormous indirect, induced and catalysing effects through an increasing number of economic and touristic activities. In this respect, Germany referred to positive secondary effects for the region, namely less unemployment and more tax payers, thereby providing more money for the municipalities in the regions to support the local economy. In total, the airport generated around 11 000 jobs through incoming tourism for the whole Rhineland-Palatinate.

(72)

Germany argued that the financing of infrastructure at Frankfurt Hahn airport has also helped to achieve the well-defined objective of common interest to combat air traffic congestion at major Union hubs. In this regard Germany pointed to the fact that the capacity limits of Frankfurt Main airport have been constantly exceeded. Germany submitted that especially in the light of its 24-hour operating licence, Frankfurt Hahn airport was therefore serving to provide additional capacity in order to relieve the congestion at Frankfurt Main airport.

(73)

Furthermore, Germany submitted that supporting Frankfurt Hahn airport also serves the objective of common interest of increasing the mobility of Union citizens. In this regard, Germany pointed out that Frankfurt Hahn airport is the only German airport offering direct flights to Kaunas (Latvia), Kerry (Ireland), Kos (Greece), Montpellier (France), Nador (Morocco), Plovdiv (Bulgaria), Pula (Croatia), Rhodos (Greece), Santiago de Compostela (Spain) and Volos (Greece). Also, according to Germany, Frankfurt Hahn airport contributes to the job mobility of young people, who can reach the region Hunsrück and Rhineland-Palatinate region at low prices. Similarly, Germany pointed out that the high-quality universities and institutions of higher education in Koblenz, Mainz, Kaiserslautern, Trier, Wiesbaden, Mannheim, Bonn, etc., where for the most part no tuition fees apply, are now easily accessible to students from all over the Union.

(74)

Germany argued, moreover, that it is also of common interest that the Hunsrück region and the surrounding regions of Rhineland-Palatinate are connected to other peripheral regions, for example Limerick, which has already manifested itself through city partnerships. As the fourth biggest national economy in the world, Germany stated that it is focussing not only on connecting to the major European hubs, but also on connecting the regions with each other. According to Germany, becoming more independent from the major hubs such as Heathrow, Charles de Gaulle, Schiphol or Frankfurt/Main, is important for the Union since it will mean not only more direct connections, but also more reliability especially for the freight business as regional airports are less prone to cancellations due to weather, strikes, terrorism or cancellation due to cancellation risks.

(75)

Lastly, Germany generally emphasised that the proximity Zweibrücken airport does not lead to a duplication of airports for the same catchment area, due to the distance of 127 km between Frankfurt Hahn airport and Zweibrücken airport. According to Germany, this distance translates into a travelling time of 1 hour and 27 minutes by car or of around 4 hours by train. Therefore, Germany argued that no reasonable worker, freight carrier or tourist whose point of departure lies in the Hunsrück region would go to Zweibrücken airport instead of Frankfurt Hahn airport in order to reach his final destination. Furthermore, Germany submitted that, looking at passenger and air freight traffic between 2005 and 2012, no relationship of substitution between the airports can be deduced. According to Germany, the main market shares of Frankfurt Hahn airport comes from the Hunsrück-Mosel-Nahe region (see Figure 5).

Figure 5

Market shares in passenger air transport of Frankfurt Hahn airport in 2013  (**)

Image

(b)   The infrastructure is necessary and proportionate to the objective

(76)

Germany considers that the financed investments are necessary and proportionate to the objective of common interest (see recital 68 and following). According to Germany, the investments were undertaken according to the needs and the constructed infrastructure was necessary for the airport in order to guarantee connectivity, to allow for the development of the region and to decongest Frankfurt Main airport. Germany pointed out that the infrastructure was not disproportionate or too opulent for the needs of users of the airport. Hence, Germany considered that this compatibility condition was met.

(c)   The infrastructure has satisfactory medium-term prospects for use

(77)

Germany submitted that before the decision to extend the airport infrastructure was taken, Fraport commissioned traffic forecast studies in order to identify the traffic potential for Frankfurt Hahn airport. Germany provided those studies which were prepared by aviation experts on behalf of Fraport. Figure 6 and Figure 8 summarise the results of one of those studies regarding the expected passenger and freight traffic development at Frankfurt Hahn airport between 2000 and 2011.

Figure 6

Total potential passengers at Frankfurt Hahn airport in 2000-2010

Image

Figure 7

Potential low-cost passenger traffic (under the assumption that Ryanair sets a base that means that it would base/station its aircraft at the airport overnight) at Frankfurt Hahn airport in 2001-2011

Image

Figure 8

Total potential freight traffic at Frankfurt Hahn airport in 2001-2010

Image

(d)   Access to the infrastructure in an equal and non-discriminatory manner

(78)

According to the information provided by Germany, all potential users of the infrastructure have access to the airport on equal and non-discriminatory terms. Germany submitted that the airport charges paid for the use of the infrastructure were based on commercially justified differentiation and that the schedule of airport charges is available to all potential users in a transparent and non-discriminatory manner.

(e)   Trade is not affected contrary to common interest

(79)

Firstly, Germany stated that there are no substitution effects between Frankfurt Hahn airport and other airports in the catchment area, such as Zweibrücken airport and Frankfurt Main airport. According to Germany, there are no undue negative effects on competition with those airports as a result of the aid granted to FFHG, either in relation to passenger or to freight traffic. Germany submitted that, on the contrary, for flying with low-cost carriers the passengers would rather use hub airports (such as Köln/Bonn or Frankfurt Main) than regional airports (such as Frankfurt Hahn). Germany argued that in recent years, low-cost carriers have increasingly had to provide more flights to the major hubs since traditional airlines have lowered their prices and started to enter the market of low-cost flights. In this regard, Germany stated that regional airports, such as Frankfurt Hahn, are now under a greater pressure to compete with the hub airports for leisure passengers. Therefore, Germany concluded that the financing has not led to any undue negative effects on competition, but has on the contrary proven appropriate for the transition of the airport towards a stable business model in the future.

(80)

Secondly, Germany argued that the fact that Fraport, before getting constituted in Frankfurt Hahn airport, was already the operator of Frankfurt Main airport, shows that no substitution movements from Frankfurt Main towards Frankfurt Hahn airport were to be expected. Instead, Fraport was investing in the possibility to decongest Frankfurt Main airport and use the additional, complementary function of Frankfurt Hahn airport, as a future capacity overload was foreseeable for the Frankfurt Main hub. According to Germany, the ban on night flights at Frankfurt Main airport was one of the main factors in this reasoning as Frankfurt Hahn airport had a 24-hour operating licence.

(81)

In conclusion, Germany argued that the effects of the financing in favour of FFHG were limited to the positive regional effects for the Hunsrück region as a whole, whilst no undue negative effects were created in relation to other airports as Frankfurt Hahn airport is being used to decongest Frankfurt Main. Furthermore, Germany stated that apart from Luxembourg airport, which is already 1 hour and 30 minutes travelling time (111 km) from Frankfurt Hahn airport, there are no other foreign airports competing in the same catchment area. Even in relation to Luxembourg, the aid granted does not have any negative distortive effect on competition according to Germany.

(f)   Incentive effect, necessity and proportionality

(82)

Germany stated that in the absence of investment aid, the level of economic activity of the airport would be significantly reduced. Germany submitted that the aid was necessary as it compensated only the costs of financing and a lower amount would lead to lower levels of investment.

4.4.2.   Assessment of compatibility of the operating aid

(83)

On 17 April 2014, Germany provided its views on the compatibility of the measures under the 2014 Aviation Guidelines. Germany argued that even if the cash-pool, the loans and underlying guarantee constituted operating aid to FFHG, then that aid was compatible with the internal market pursuant to Article 107(3)(c) of the Treaty and Section 5.1.2 of the 2014 Aviation Guidelines. Germany set out its arguments in more detail with regard to the respective compatibility conditions.

(a)   Contribution to a well-defined objective of common interest

(84)

Concerning the requirement that the aid must contribute to the achievement of the well-defined objective of common interest, Germany submitted that the coverage of operating costs of FFHG was always aimed at the objective of improving the economic structure of the economically underdeveloped and scarcely populated Hunsrück region. In this regard the Germany used the same reasoning as for the assessment of the compatibility of the investment aid to finance the airport infrastructure (see Section 4.4.1).

(b)   Need for state intervention

(85)

Germany explained why Frankfurt Hahn is making operational losses which have to be covered. Germany stated that it is quite an ambitious objective for an airport such as Frankfurt Hahn airport with 1-3 million passengers to become profitable and be able to cover its operating costs. According to Germany, it was not possible to achieve this ambitious objective in the start-up years (referring to the period between the start of commercial passenger traffic at the airport until today) of Frankfurt Hahn airport since the airport was burdened by very high infrastructure investments which it financed itself on the capital market and for which it had to pay high interest. In addition, Germany stated that since the world economic and financial crisis, there has been a stagnation of passenger and especially freight traffic.

(86)

Germany submitted that in the light of these circumstances, there was a need for state invention to cover the operating losses since FFHG would otherwise have become insolvent. According to Germany, this would also have resulted in the withdrawal of the 24-hour operating licence, meaning that FFHG would have had to stop operating all flights, resulting in turn in the loss of clients, such as airlines and freight carriers. Germany pointed out that it would then also have become very difficult to find a new operator for the airport.

(c)   Appropriateness of the aid measures as policy instruments

(87)

Germany submitted that covering the operating costs was an appropriate measure to achieve the intended objective. Germany argued in this respect that if Frankfurt Hahn airport had had to stop operating and had disappeared from the relevant markets, then the objectives of common interest pursued in developing the Hunsrück region and making conversion investments would not have been achieved. In this regard, Germany emphasised that in contrast to a private investor, a public investor has to take those objectives into account when considering the alternative of closure of the airport.

(d)   Existence of an incentive effect

(88)

Germany argued that in order to maintain Frankfurt Hahn airport in operation, it was a necessary to cover its operating costs as FFHG would otherwise have become insolvent. Germany stated that the coverage of operating costs was in turn the basis also for realising the objectives of common interest as stated in recital 84 and following. Furthermore, Germany argued that without this operating aid, the financial consolidation of the airport as foreseen by the operator now would have been unthinkable, since the airport would have accrued more and more debt instead of making it out of its debts. According to Germany, the incentive effect of the measures is already demonstrated by that fact that FFHG is continuously progressing towards profitability.

(e)   Proportionality of the aid amount (aid limited to a minimum)

(89)

Germany argued that any aid element contained in the loans was limited to the operating losses and represented the absolute minimum necessary in order to maintain Frankfurt Hahn airport in operation and keep it from becoming insolvent.

(f)   Avoidance of undue negative effects on competition and trade between Member States

(90)

Germany considered that there were no undue negative effects on competition and trade between Member States. In this regard Germany used the same reasoning as for the assessment of the compatibility of investment aid to finance airport infrastructure (see Section 4.4.1).

5.   COMMENTS FROM THIRD PARTIES

5.1.    Land Rhineland-Palatinate

(91)

The Commission only received comments on the opening decision from Land Rhineland-Palatinate. These comments were in line with the comments from Germany.

(92)

First of all, Land Rhineland-Palatinate stated that FFHG did not receive any State aid because it did not obtain an economic advantage. The Land argued that the measures taken by it would have been taken by any private investor in the same situation. It strongly emphasised that the Commission's procedure is limiting the potential development of FFHG and its business. Land Rhineland-Palatinate underlined the importance of Frankfurt-Hahn airport for incoming-tourism and the economy of the Land.

(93)

According to Land Rhineland-Palatinate, even if State aid was granted to FFHG, it is compatible with the internal market. In the Land's view, the financing was intended to develop the airport infrastructure, which is of outstanding economic interest for the Land.

(94)

Therefore, the Land is of the opinion that even if the Commission takes the view that State aid was involved, it must be considered as State aid within the meaning of Article 107(3)(c) Treaty and be deemed compatible with the internal market.

5.2.   Comments on the implementation of the 2014 Aviation Guidelines to the pending case

5.2.1.   Lufthansa

(95)

Lufthansa asserted that the Commission should apply the 2004 Rescue and Restructuring Guidelines (32) in this case. According to Lufthansa the measures involve continuous illegal and incompatible rescue aid implemented by Land Rhineland-Palatinate in favour of FFHG. Lufthansa stated that the airport has been ever since incurring annual losses and without the public support it would have had to exit the market.

5.2.2.   Transport & Environment

(96)

This non-governmental organisation made comments criticising the 2014 Aviation Guidelines and decisions of the Commission regarding the aviation industry so far, for their allegedly negative effects on the environment.

6.   ASSESSMENT

(97)

By virtue of Article 107(1) of the Treaty ‘any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

(98)

The criteria laid down in Article 107(1) of the Treaty are cumulative. Therefore, in order to determine whether measures constitute State aid within the meaning of Article 107(1) of the Treaty, all of the following conditions need to be fulfilled. Namely, the financial support must:

(a)

be granted by the state or through state resources;

(b)

favour certain undertakings or the production of certain goods;

(c)

distort or threaten to distort competition; and

(d)

affect trade between Member States.

6.1.   Aid nature of the credit line provided by the cash-pool of Land Rhineland-Palatinate

6.1.1.   Notion of undertaking and economic activity

(99)

According to settled case law, the Commission must first establish whether the FFHG is an undertaking within the meaning of Article 107(1) of the Treaty. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed (33). Any activity consisting in offering goods or services on a given market is an economic activity (34).

(100)

In its Leipzig/Halle Airport judgment the General Court confirmed that the operation of an airport for commercial purpose and the construction of the airport infrastructure constitute an economic activity (35). Once an airport operator engages in economic activities by offering airport services against remuneration, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) of the Treaty, and the Treaty rules on State aid are therefore capable of applying to advantages granted by the state or through state resources to that airport operator (36).

(101)

Regarding the moment in time from which the construction and operation of an airport became an economic activity, the gradual development of market forces in the airport sector does not allow for a precise date to be determined. However, the General Court has recognised the evolution in the nature of airport activities and in its judgment in Leipzig/Halle Airport, the General Court held that from 2000 onward the application of State aid rules to the financing of airport infrastructure could no longer be excluded. Consequently, from the date of the judgment in Aéroports de Paris (12 December 2000) (37), the operation and construction of airport infrastructure must be considered as an economic activity falling within the ambit of State aid control.

(102)

In this regard, the airport which is the subject of this Decision is operated by FFHG, the airport manager, on a commercial basis. The airport manager, FFHG, charges users for the use of that infrastructure. FFHG is therefore an undertaking for the purposes of Union competition law.

6.1.2.   State resources and imputability to the state

(103)

In order to constitute State aid, the measure in question has to be financed from state resources and the decision to grant the measure must be imputable to the state.

(104)

The concept of State aid applies to any advantage granted through state resources by the state itself or by any intermediary body acting by virtue of powers conferred on it (38). Resources of local authorities are, for the application of Article 107 of the Treaty, state resources (39).

(105)

Germany first submitted that the cash-pool of the Land Rhineland-Palatinate is not financed directly out of the public budget of the Land. It claimed that all funds in the cash-pool either stem from the participating undertakings or are obtained in the form of loans on the capital market. In a subsequent submission, Germany stated that the funds drawn from the cash-pool by FFHG are not covered by a guarantee of the Land, as the funds are directly provided from the Land's resources (40).

(106)

The Commission considers that in the case at hand, at all material times the state exercised direct or indirect control over the resources in the cash-pool, with the consequence that these constituted state resources. First, Germany itself submitted that the credit line provided by the cash-pool was financed directly from the resources of the Land Rhineland-Palatinate. Hence, the measure at stake was financed out of state resources.

(107)

Second, only undertakings in majority ownership by Land Rhineland-Palatinate (at least 50 % ownership) can participate in the cash-pool. Because of the majority public ownership, the participating undertakings are clearly public undertakings within the meaning of Article 2(b) of Commission Directive 2006/111/EC (41). Since all the participating undertakings are thus public undertakings, their resources constitute state resources. This fact alone signifies that the funds of the cash-pool, to the extent they are made up of the deposits made by the participating undertakings, constitute state resources.

(108)

Third, in the event that the participating undertakings' deposits in the cash-pool are insufficient to satisfy the liquidity needs of a participant, Land Rhineland-Palatinate obtains short-term financing on the financial markets in its own name and passes those funds on to the undertakings participating in the cash-pool. As the Land takes out the necessary loans in its own name, it must be considered that the funds thus obtained constitute state resources as well. As shown in Figure 2, between 2009 and 2013 (except August 2012 and September 2013) the deposits of the participating undertakings in the cash-pool were insufficient to satisfy the liquidity needs of all participants and the Land had to take out the necessary loans in its own name.

(109)

Thus, the Commission considers that the funding provided by the cash-pool is financed by state resources, as both the deposits by participating undertakings and the loans taken out by the Land to overcome liquidity gaps in the cash-pool constitute state resources.

(110)

It is furthermore clear that the Land had far-reaching control over the operation of the cash-pool, with the consequence that the financing provided to participating undertakings is imputable to the State. The agreement for participation in the cash-pool is concluded between the Land and the undertakings involved. The decision to allow an undertaking to participate in the cash-pool is thus taken directly by the Land. The Land also decides on the maximum amount that a participating undertaking may withdraw from the cash-pool in the form of a credit line. In addition, Land Rhineland-Palatinate directly manages the day-to-day operations of the cash-pool through the ‘Landeshauptkasse’, which is an institution of the Ministry of Finance of the Land Rhineland-Palatinate. The ‘Landeshauptkasse’ also officially represents the Land when obtaining funds on the market to bridge liquidity gaps in the cash-pool.

(111)

Based on these elements, the Commission considers that the state is capable of directly controlling the activities of the cash-pool, most centrally the question of which undertaking may participate and the individual credit line granted to each participating undertaking. Hence, the decisions concerning the participation in the cash-pool and the extent of that participation are imputable to the state.

6.1.3.   Economic advantage

(112)

An advantage within the meaning of Article 107(1) of the Treaty is any economic benefit which an undertaking would not have obtained under normal market conditions, that is to say, in the absence of state intervention (42). Only the effect of the measure on the undertaking is relevant, not the cause nor the objective of the state intervention (43).

(113)

Whenever the financial situation of the undertaking is improved as a result of State intervention, an advantage is present. Conversely, ‘capital placed directly or indirectly at the disposal of an undertaking by the State in circumstances which correspond to normal market conditions cannot be regarded as State aid’ (44).

(114)

In order to verify whether an undertaking has benefited from an economic advantage induced by the granting of a loan or any other form of debt financing, the Commission applies the criterion of the market economy lender principle. Accordingly, the Commission has to assess whether the conditions of the cash-pool provided to FFHG confer an economic advantage on it which the recipient undertaking would not have obtained under normal market conditions.

(115)

Germany submitted that the market economy lender principle was fully respected as the cash-pool provides financing at market conditions. With respect to the participation of FFHG in the cash-pool, Germany has explained that the cash-pool functions as follows: FFHG requests funds from the pool to ensure its liquidity, and the Land provides those funds from the cash-pool. The interest rates charged to FFHG are market-based call money rates (45), at the level available to the Land itself, as shown in Figure 4.

(116)

Where the deposits of participating undertakings are insufficient to cover the request, the Land replenishes the cash-pool by taking up loans in its own name. Germany further explained that the Land essentially passes on the conditions it obtains on the capital market to the participants in the cash-pool, thereby allowing the participants — the Land's undertakings in which the Land holds a majority of shares — to refinance themselves under the same conditions as the Land itself, without any consideration of their creditworthiness. Moreover, the financing is available to the undertakings for an unlimited period of time.

(117)

In the light of this mechanism, an advantage is granted to FFHG where the conditions on which the Land grants loans from the cash-pool are more favourable than those otherwise available to FFHG on the market. The conditions for taking up loans from the cash-pool are the same as those available to the Land to refinance itself. Considering that the Land, as a public authority, is able to take up loans at very favourable rates (as there is virtually no risk of default and the credit rating of the Land corresponds to AAA (46)), the Commission considers that the rate at which FFHG can obtain a loan from the cash-pool is more favourable than that otherwise available to it. This is further supported by the credit ratings of FFHG in 2009 to 2014 provided by Germany and summarised in Table 7, showing that the credit rating of FFHG varies between […]. Hence, the loans from the cash-pool were available at better conditions than the creditworthiness of FFHG would justify. In addition, FFHG does not have to provide collateral for those loans. Thus, by allowing FFHG to participate in the cash-pool and by handing out the loans under the credit line, the Land granted an economic advantage (47).

6.1.4.   Selectivity

(118)

Article 107(1) of the Treaty requires that, in order to be defined as State aid, a measure must favour ‘certain undertakings or the production of certain goods’.

(119)

As the right to participate in the cash-pool was granted only to FFHG (and other undertakings in which the Land holds a majority of shares), the measure is selective within the meaning of Article 107(1) of the Treaty.

6.1.5.   Distortion of competition and effect on trade

(120)

When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Union trade, the latter must be regarded as affected by that aid. In accordance with settled case-law (48), for a measure to distort competition it is sufficient that the recipient of the aid competes with other undertakings on markets open to competition.

(121)

As assessed in recital 102 and following, the operation of an airport is an economic activity. Competition takes place, on the one hand, between airports to attract airlines and the corresponding air traffic (passengers and freight), and, on the other hand, between airport managers, which may compete between themselves to be entrusted with the management of a given airport. Moreover, in particular with respect to low-cost carriers and charter operators, airports that are not located in the same catchment areas and even in different Member States can also be in competition with each other to attract those airlines.

(122)

The size of Frankfurt Hahn airport (between 2,7 and 3,8 million passengers during the period under consideration, see Table 1) and its proximity to other Union airports, in particular Frankfurt Main airport, Luxembourg airport, Zweibrücken airport, Saarbrücken airport and Köln-Bonn airport (49), allows the conclusion that the financing is liable to distort competition and have an effect on trade between Member States. There are international flights from Frankfurt Hahn airport to a number of international destinations as set out in recital 73. The runway at Frankfurt Hahn airport is of sufficient length (3 800 m) to be used by bigger aircraft and allows airlines to serve medium- to even long-haul international destinations.

(123)

In addition, Frankfurt Hahn airport serves as a freight airport, handling around 200 000 tonnes of air freight per year and 500 000 tonnes of freight, including freight trucking, in total (see Table 2). With regard to competition for air freight, the Commission notes that freight is usually more mobile than passenger transport (50). In general, the catchment area for freight airports is considered to have a radius of at least around 200 kilometres and 2 hours travelling time. Based on the Commission's information, industry players generally consider that the catchment area of a freight airport may be even larger as up to a half a day of trucking time (that is to say, up to 12 hours driving time by trucks) would in general be acceptable for freight forwarders to use the airport in order to transport freight (51). Hence, since freight airports are more fungible than passenger airports, because it is sufficient for the air freight to be delivered into a certain area and then forwarded by road and rail freight forwarders to its final destination, the Commission considers that there is a higher risk of distortion of competition and effect on trade between Member States.

(124)

On the basis of the arguments presented in recitals 120 to 123, the economic advantage which FFHG receives strengthens its position vis-à-vis its competitors on the Union market for the provision of airport services. Against this background, the advantage provided to FFHG through its participation in the cash-pool of the Land must be considered as being liable to distort competition and have an effect on trade between Member States.

6.1.6.   Conclusion

(125)

In the light of the considerations in recitals 99 to 124, the Commission considers that the credit line provided by the cash-pool of the Land to FFGH constitutes State aid within the meaning of Article 107(1) of the Treaty.

6.2.   Aid nature of the 100 % guarantee for the ISB loans provided by Land Rhineland-Palatinate to FFHG

(126)

The ISB loans assessed in Section 6.3 are guaranteed by Land Rhineland-Palatinate (guarantor), which is at the same time the main shareholder (82,5 %) in FFHG. Each of the five ISB loans has been collateralized with a guarantee covering 100 % of the claims of the bank. For the provision of the guarantees FFHG pays a guarantee premium of [0,5 % to 1,5 %] p. a. to the guarantor.

6.2.1.   Applicability of State aid rules to the financing of airport infrastructure

(127)

For the reasons outlined in recital 99 and following, FFHG must be considered to constitute an undertaking for the purposes of Article 107(1) of the Treaty.

6.2.2.   State resources and imputability

(128)

In order to constitute State aid, the measure in question must be financed from state resources and the decision to grant the measure must be imputable to the state.

(129)

The concept of State aid applies to any advantage granted through state resources by the state itself or by any intermediary body acting by virtue of powers conferred on it (52). Resources of local authorities are, for the application of Article 107 of the Treaty, state resources (53).

(130)

Any public guarantee involves a potential loss of resources by the state. As the 100 % state guarantee was issued directly by the Land Rhineland-Palatinate, it was granted from state resources and is also imputable to the state.

6.2.3.   Economic advantage

(131)

According to point 3.2 of the guarantee notice, an individual state guarantee is not aid when the following cumulative conditions are met: ‘(a) The borrower is not in financial difficulty […], (b) The extent of the guarantee can be properly measured when it is granted. […] (c) the guarantee does not cover more than 80 % of the outstanding loan or other financial obligation […], (d) A market-oriented price is paid for the guarantee […]’.

(132)

In this case the Land Rhineland-Palatinate provided a 100 % guarantee to collateralise the loans granted by ISB in favour of FFHG. The guarantee thus exceeds the threshold of 80 % of the outstanding loan.

(133)

Germany submitted that even though the loans were collateralised through a 100 % state guarantee, FFHG pays a market price for the guarantee, and hence receives no advantage. To support this, Germany provided an assessment conducted by Deutsche Bank. As stated in recital 153, Deutsche Bank assigned FFHG a [<BBB+] rating. This assessment was confirmed by two other banks and the rating assigned by the Moody's credit-scoring model (see recitals 157 and 158). However, Deutsche Bank estimated that the applicable risk margin for a 5-year loan would be between [1,30 % and 2,05 %] p. a. As explained in Section 6.3.2, the applicable risk margin for a loan collateralised by a 100 % state guarantee would be between [0,25 % and 0,7 %] p.a. According to Germany, the difference in the margins between the two situations provides an indication of the price of the 100 % state guarantee. This difference is thus estimated by Deutsche Bank as being in the range of [0,6 % to 1,8 %] p.a. (54).

(134)

According to point 4.2, second subparagraph, of the guarantee notice, the advantage can be calculated as the difference between the specific market interest rate FFHG would have borne without the guarantee and the interest rate obtained by means of the state guarantee after any premium paid has been taken into account.

(135)

According to the Reference Rate Communication, for a company in the rating category of weak (B) and with normal collateralisation (55) a risk margin of 4 % p.a. would apply. The difference between the risk margin applicable according to the Reference Rate Communication and the risk margin charged for the ISB loans together with the guarantee rate actually charged by the Land gives an indication of the advantage FFHG received due to the 100 % state guarantee. This difference amounts, for loans numbers 2 and 5, to [1,5 % to 3,5 %] p.a. (56) and [1,5 % to 3,5 %] p.a. (57) respectively and for loans numbers 1, 3 and 4, to [1,5 % to 3,5 %] p.a. (58) Moreover, FFHG has not paid any bank fee (typically between [5 to 30] basis points (59)). It is clear that under normal market conditions, FFHG would have had to pay such a guarantee premium (that is [0,5 % to 1,5 %] p.a.) in order to obtain a guarantee on its loans from a third party. Therefore the guarantee clearly involves an advantage.

(136)

As the guarantee issued by the Land covers 100 % of the outstanding loan and FFHG pays a premium below the market price, it obtained an economic advantage not otherwise available on the market. The amount of this advantage is equivalent to the difference between the risk margin applicable according to the Reference Rate Communication and the risk margin charged for the ISB loans together with the guarantee rate actually charged by the Land and a bank fee.

6.2.4.   Selectivity

(137)

As the 100 % state guarantee was granted only to FFHG, the measure has to be qualified as being selective in nature.

6.2.5.   Distortion of competition and effect on trade

(138)

For the same reasons as outlined in recital 120 and following, the Commission considers that any selective economic advantage granted to FFHG is liable to distort competition and affect trade between Member States.

6.2.6.   Conclusion

(139)

In the light of the considerations in recitals 127 to 138, the Commission considers that the state guarantee issued by Land Rhineland-Palatinate securing 100 % of the outstanding ISB loans constitutes State aid within the meaning of Article 107(1) of the Treaty.

6.3.   Aid nature of the loans provided by ISB to FFHG

6.3.1.   Applicability of State aid rules to financing of airport infrastructure

(140)

For the reasons outlined in recital 99 and following, FFHG must be considered to constitute an undertaking for the purposes of Article 107(1) of the Treaty.

6.3.2.   State resources and imputablity to the state

(141)

ISB is 100 % owned by Land Rhineland-Palatinate. For this reason it constitutes a public undertaking within the meaning of Article 2(b) of Directive 2006/111/EC and loans provided by it may therefore be considered as financed by state resources.

(142)

It is clear that the Land had far-reaching control over the operation of ISB, with the consequence that the loans provided by it are imputable to the state. ISB is the development bank of Land Rhineland-Palatinate and plays a fundamental role in regional development policy. According to §3(1) of the statute of the bank, ISB's role is to support the Land in its financial, economic, regional, transport, environmental and employment policies. This case, the ISB loans refinanced earlier loans granted to FFHG for financing infrastructure measures at the airport.

(143)

Furthermore, in addition to two representatives of the Chamber of Crafts as well as the Chamber of Industry and Commerce, ISB's supervisory board (‘Verwaltungsrat’) consists of five representatives of public authorities (including two state secretaries in the Ministry of Finance of the Land Rhineland-Palatinate and the Ministry of Economy, Transport, Agriculture and Viticulture of Land Rhineland-Palatinate, respectively) which ensures the supervision of ISB's activities by the state. Also, its advisory board (‘Beirat’) consists of representatives of public authorities.

(144)

Moreover, the ISB loans were secured by a 100 % state guarantee issued by the Land (see Section 6.2).

(145)

Based on these elements, the Commission considers that the State was able to control the activities of ISB and it cannot be assumed that it would not have been involved in an important decision concerning the financing of the airport infrastructure. Therefore, the Commission takes the view that the decision to refinance FFHG's prior loans by way of the ISB loans is imputable to the public authorities.

6.3.3.   Economic advantage

(146)

In order to verify whether an undertaking has benefited from an economic advantage induced by the granting of a loan, the Commission applies the criterion of the market economy lender principle. According to that principle, debt capital put at the disposal of a company by the state, directly or indirectly, in circumstances which correspond to the normal conditions of the market, should not be qualified as State aid (60).

(147)

The principle of a lender in a market economy determines what a private company of a comparable size would do in a comparable situation. It aims to identify and separate those financial measures taken by the State that would not have been taken by a private investor from those which are financially reasonable, and would therefore have been taken by a private investor, in order to determine if there is an economic advantage.

(148)

According to its decisional practice (61), in order to determine whether the financing under assessment was granted at favourable conditions, the Commission may — in the absence of other proxies — compare the interest rate on the loan in question with those set out in the Reference Rate Communication.

(149)

The Reference Rate Communication establishes a method for setting reference and discount rates that are applied as a proxy for the market rate. However, because the rates in the Reference Rate Communication function as a proxy, where the Commission is in the possession of other indicators in a specific case of the interest rate that the borrower could obtain on the market, it bases its assessment on those indicators.

(150)

In this case, the Commission has to assess whether the conditions of the ISB loans (as summarised in Table 5 collateralised by a 100 % state guarantee confer any additional economic advantage on FFHG, which the recipient undertaking would not have obtained under normal market conditions. The market conformity of the conditions of the 100 % state guarantee provided by the Land Rhineland-Palatinate has been assessed in Section 6.2.

(151)

Germany submitted that the ISB loans were concluded on market terms comparable to those of the loans which they refinanced (see recital 52 and following). In this respect, Germany stated that the conditions of the ISB loans were comparable to the loans granted by Nassauische Sparkasse in 2005, which were collateralised in a way comparable to the ISB loans. Hence, Germany asserted that, as the interest payable on the ISB loans was at the same level as the interest on the loans which the ISB loans refinanced, there cannot be any advantage in favour of FFHG.

(152)

Moreover, Germany explained that in 2009, in preparation for the new financing, FFHG commissioned Deutsche Bank to provide a risk margin indication for the refinancing of its existing loans taking into account the 100 % guarantee provided by Land Rhineland-Palatinate.

(153)

In line with the methodology underlying the Reference Rate Communication, the Commission is of the opinion that loan interest rates can be deemed in line with market conditions when the loans are priced at a rate equal to or higher than a benchmark rate defined by the following formula:

Benchmark rate = base rate + risk margin + fee

(154)

The base rate represents the cost for banks of providing liquidity (funding cost). In the case of fixed-rate funding (that is to say, the interest rate is fixed for the duration of the loan), it is appropriate to determine the base rate on the basis of swap rates (62) with a maturity and currency corresponding to the maturity and the currency of the debt. The risk margin compensates the lender for the risks associated with the specific debt financing, in particular the credit risk. The risk margin can be derived from an appropriate sample of CDS spreads (63) relating to reference entities with a similar rating. Finally, it is appropriate to add 10-20 basis points as an approximation for the bank fees companies usually have to pay (64).

Appropriateness of the risk margins depending on the rating

(155)

In order to determine whether an appropriate risk premium has been added to the base rate the rating of the undertaking needs to be determined. FFHG is not rated by a credit rating agency. Germany, however, submitted that, in the risk margin indication of Deutsche Bank, the bank also assessed the credit worthiness of FFHG. On the basis of Deutsche Bank's analysis of FFHG's financial reports of 2006 to 2008, it puts FFHG in the [<BBB+] rating category. However it does not specify an exact rating for the company.

(156)

The Commission notes that the [<BBB+] rating category includes all ratings that are below [BBB+]. Hence, the [<BBB+] rating of FFHG according to Deutsche Bank could accordingly be interpreted as any rating below [BBB+] on the Standard & Poor's rating scale.

(157)

Besides the analysis of Deutsche Bank, Germany submitted rating indications for FFHG conducted by two other banks. The Commission notes that these banks also assigned FFHG a [<BBB+] rating category. In 2010 Volksbank assigned FFHG a rating of […] according to its internal rating scale (that rating corresponds to [B to BB] on the Standard & Poor's rating scale). In 2011 Kreissparkasse Birkenfeld assigned FFHG a rating of […] according to its rating scale (that rating corresponds to [B- to BB-] on the Standard & Poor's rating scale).

(158)

Finally, Germany provided ratings of FFHG established according to Moody's credit-scoring model based on the data available at the time the ISB loans were granted (see Table 8). These ratings confirm the [<BBB+] rating assigned by Deutsche Bank and vary between [B2] on the Moody's rating scale (this is [B] on the Standard & Poor's rating scale) and [Baa3] on the Moody's rating scale (this is [BBB-] on the Standard & Poor's rating scale).

(159)

In the light of the considerations in recitals 153 to 158, the Commission considers that FFHG's rating corresponds to no better than [BBB-] on the Standard & Poor's rating scale.

(160)

However, in order to determine whether, in addition to any possible advantage granted through the 100 % state guarantee (see Section 6.2), the ISB loans conferred any advantage on FFHG, the rating of the issuer of the 100 % state guarantee (that is the rating of the Land Rhineland-Palatinate) needs to be taken into account as otherwise the advantage stemming from the state guarantee would be taken into account twice. As stated in recital 117, the Land Rhineland-Palatinate has an AAA rating.

(161)

Therefore, given that the ISB loans were granted against the background of a state guarantee, the Commission considers it appropriate to determine the risk margin on the basis of 5-year EUR bonds of the German Länder (amounting to [5 to 25] basis points). The Commission further observes that in its analysis Deutsche Bank added a risk premium of [5 to 25] basis points due to the fact that the loans were not granted directly to the Land, but were only collateralised by a 100 % state guarantee, as well as an additional premium of [5 to 25] basis points for the limited tradability of the debt. The Commission considers that these are reasonable assumptions and that the resulting risk margin between [20 basis points and 70] basis points is appropriate given the creditworthiness of the issuer of the guarantee.

Market conformity of ISB loans numbers 2 and 5

(162)

With regard to ISB loans numbers 2 and 5 which have variable rates the actual interest rate is Euribor plus a risk margin of [0,35 %-0,55 %] p.a. and [0,25 %-0,45 %] p.a., respectively. The risk margin for ISB loan number 2 was within the bandwidth determined by Deutsche Bank, while the risk margin for ISB loan number 5 was 4 basis points below the risk premium determined by Deutsche Bank. No bank fee was charged on either of the two ISB loans. Hence, the Commission considers that the rate charged for the provision of the two loans provides an (albeit small) element of advantage (the interest rate paid for loan number 2 appears to be between [10-30] basis points below the benchmark rate and for loan number 5 between [5-25] basis points).

Market conformity of ISB loans numbers 1, 3 and 4

(163)

The Commission notes that the interest rate of ISB loans numbers 1, 3 and 4 is fixed. As all three loans are amortising, in order to establish the relevant maturity of the loans in question, the amortisation of the loans has to be taken into account.

(164)

The Commission has for that purpose calculated the weighted average life (WAL) of the loans, which indicates the average number of years that each euro remains outstanding. The WAL of loan number 1 has been calculated at 3,92 years, the WAL of loan number 3 at 1,17 years and the WAL of loan number 4 at 3,29 years.

(165)

To determine the base rate of loan number 1 as its WAL amounts to 3,92 years, the Commission has used the four-year EUR swap rate (65) as a proxy. For loan number 3, the one-year EUR swap rate (66) is used as the closest approximation to its WAL of 1,17 years. For loan number 4, the three-year swap rate (67) is used as an approximation of its WAL of 3,29 years. The relevant swap rates have been obtained from Bloomberg, for the day when the loans were drawn (68). The values of the corresponding swap rates are as follows: [2 %-3 %] for loan number 1, [1 %-1,5 %] for loan number 3, and [1,5 %-2,5 %] for loan number 4 (69).

(166)

That approach leads to a benchmark rate for loan number 1 (with a 100 % state guarantee) of [2,5 %-4,5 %] (70), for loan number 3 (with a 100 % state guarantee) of [1,5 %-3 %] (71) and for loan number 4 (with a 100 % state guarantee) of [2 %-3,5 %] (72).

(167)

Loans numbers 1, 3 and 4 were granted at rates well above these calculated benchmark rates (loan number 1 at [> 3 %;< 4,5 %], loan number 3 at [> 3 %;< 4,5 %] and loan number 4 at [> 3 %;< 4,5 %]) and the Commission considers that fact to be an indication that the loans were indeed in line with market conditions, thereby excluding the existence of an advantage.

6.3.4.   Selectivity

(168)

As ISB loans numbers 2 and 5 were granted at preferential conditions only to FFHG, the measures have to be qualified as being selective in nature.

6.3.5.   Distortion of competition and effect on trade

(169)

For the same reasons as outlined in recital 120 and the following, the Commission considers that any selective economic advantage granted to FFHG is liable to distort competition and affect trade between Member States.

6.3.6.   Conclusion

(170)

In view of recitals 140 to 169 above, the Commission concludes that ISB loans numbers 1, 3 and 4 were granted at rates that can be deemed in line with market conditions, thereby excluding the existence of an advantage. Hence, given that the cumulative criteria in Article 107(1) of the Treaty are not fulfilled, the Commission considers that these ISB loans do not constitute State aid within the meaning of Article 107(1) of the Treaty.

(171)

In view of recitals 140 to 169 above, the Commission concludes that ISB loans numbers 2 and 5 were granted below the benchmark rate. Hence, since the other criteria in Article 107(1) of the Treaty are fulfilled, the Commission considers that these ISB loans constitute State aid (albeit in a small amount).

6.4.   Lawfulness of the aid

(172)

Pursuant to Article 108(3) of the Treaty, Member States must notify any plans to grant or alter aid, and must not put the proposed measures into effect until the notification procedure has resulted in a final decision.

(173)

As the funds provided by the cash-pool at privileged terms, the ISB loans numbers 2 and 5 and the 100 % state guarantee have already been put at the disposal of FFHG, the Commission considers that Germany has not respected the requirements of Article 108(3) of the Treaty (73).

6.5.   Compatibility

6.5.1.   The applicability of the Rescue and Restructuring Guidelines

(174)

Lufthansa considers that the Commission should apply the Rescue and Restructuring Guidelines when assessing the State aid measures at stake.

(175)

The Aviation Guidelines contain specific and detailed rules for the public funding of airports, including operating aid. As stated in point 117 of the 2014 Aviation Guidelines, smaller airports may have difficulties in ensuring the financing of their operation without public support, due to high fixed costs (funding gap).

(176)

Even if one were nevertheless to apply the Rescue and Restructuring Guidelines in the case of aid to an airport, they are not applicable in this case because FFHG was not an undertaking in difficulty.

(177)

According to the 2014 Rescue and Restructuring Guidelines (74), the Commission will conduct the examination of the aid measures on the basis of the guidelines applied at the time the aid was granted. As, in this case, the aid was granted between 2009 to 2011 (that is well before the publication of the 2014 Rescue and Restructuring Guidelines in the Official Journal), the Commission will examine whether FFHG could be considered as an undertaking in difficulty on the basis of the 2004 Rescue and Restructuring Guidelines (that is to say, the guidelines which were applied at the time when the aid was granted).

(178)

According to point 10 of the 2004 Rescue and Restructuring Guidelines, an undertaking is considered as being in difficulty where, in the case of a limited liability company, more than half of its registered capital has disappeared and more than one quarter of that capital has been lost over the preceding 12 months, or where the undertaking fulfils the criteria under its domestic law for being the subject of collective insolvency proceedings.

(179)

In this case, neither of the two conditions had been met at the time the aid was granted. The registered capital of FFHG, which is a limited liability company, remained stable at EUR 50 million in the period 2007 to 2010, and showed a slight decrease from EUR 50 million to EUR 44 million in 2011 and EUR 38 million in 2012. Nor has FFHG fulfilled the criteria under its domestic law for being the subject of collective insolvency proceedings.

(180)

The financial results summarised in Table 4 do not suggest that FFHG should be considered as an undertaking in difficulty. In this regard, according to point 11 of the 2004 Rescue and Restructuring Guidelines an undertaking may be considered to be in difficulties even where the conditions of point 10 are not fulfilled, in particular where the usual signs of an undertaking being in difficulty are present, such as increasing losses, diminishing turnover, declining cash flow, mounting debt, rising interest charges, etc. However, in this case, despite the decrease in the number of passengers due to the financial and economic crisis, the financial results of FFHG showed that it made progress towards becoming profitable.

(181)

In view of the considerations in recital 175 and following, the Commission considers that FFHG cannot be considered as an undertaking in difficulty at the time the aid was granted, and the 2004 Rescue and Restructuring Guidelines are thus not applicable.

6.5.2.   The applicability of the 2014 and 2005 Aviation Guidelines

(182)

Article 107(3) of the Treaty provides for certain exemptions to the general rule set out in Article 107(1) of the Treaty that State aid is not compatible with the internal market. The aid in question can be assessed on the basis of Article 107(3)(c) of the Treaty, which stipulates that: ‘aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest’, may be considered to be compatible with the internal market.

(183)

In this regard, the 2014 Aviation Guidelines provide a framework for assessing whether aid to airports may be declared compatible pursuant to Article 107(3)(c) of the Treaty.

(184)

According to the 2014 Aviation Guidelines, the Commission considers that the ‘Commission notice on the determination of the applicable rules for the assessment of unlawful State aid’ (75) applies to unlawful investment aid to airports. In this respect, if the unlawful investment aid was granted before 4 April 2014, the Commission will apply the compatibility rules in force at the time when the unlawful investment aid was granted. Accordingly, the Commission will apply the principles set out in the 2005 Aviation Guidelines in the case of unlawful investment aid to airports granted before 4 April 2014 (76).

(185)

Conversely, the Commission stated in the 2014 Aviation Guidelines that the ‘Commission notice on the determination of the applicable rules for the assessment of unlawful State aid’ should not apply to pending cases of illegal operating aid to airports granted prior to 4 April 2014. Instead, the Commission will apply the principles set out in the 2014 Aviation Guidelines to all cases concerning operating aid (pending notifications and unlawful non-notified aid) to airports even if the aid was granted before 4 April 2014 and the beginning of the transitional period (77).

(186)

The Commission has already concluded in recital 173 that the measures under assessment constitute unlawful State aid granted before 4 April 2014.

6.5.3.   Distinction between investment and operating aid

(187)

In view of the provisions of the 2014 Aviation Guidelines referred to in recitals 184 and 185, the Commission has to determine whether the measures in question constitute unlawful investment or operating aid.

(188)

According to point 25(r) of the 2014 Aviation Guidelines, investment aid is defined as ‘aid to finance fixed capital assets; specifically, to cover the “capital costs funding gap”’. Moreover, according to point 25(r) of the guidelines, investment aid can relate both to an upfront payment (that is to say cover upfront investment costs) and to aid paid out in the form of periodic instalments (to cover capital costs, in terms of annual depreciation and costs of financing).

(189)

Operating aid, on the other hand, means aid covering all or part of the operating costs of an airport, defined as ‘the underlying costs of the provision of airport services, including categories such as costs of personnel, contracted services, communications, waste, energy, maintenance, rent, administration, etc., but excluding the capital costs, marketing support or any other incentives granted to airlines by the airport, and costs falling within a public policy remit’ (78).

(190)

In the light of these definitions, the Commission considers that the 100 % state guarantee for the ISB loans provided at privileged terms and the ISB loans numbers 2 and 5 constitute investment aid in favour of FFHG. These funds were all linked to the refinancing of loans which in turn financed a particular infrastructure investment project (see Table 9). Moreover, the amounts of the ISB loans are equal to or lower than the respective investments carried out.

Table 9

Comparative overview of the amount of the ISB loans and their purpose  (79)

ISB loan no

Loan amount in EUR million

Purpose of the loan

1

18,4

[…] infrastructure investments amounting to […]

2

20,0

[…] infrastructure investments amounting to […]

3

2,5

[…] infrastructure investments amounting to […]

4

25,9

[…] infrastructure investments amounting to […]

5

6,8

[…] infrastructure investments amounting to […]

(191)

Therefore, the Commission takes the view that the 100 % state guarantee for the ISB loans and ISB loans numbers 2 and 5 constitute unlawful investment aid granted before 4 April 2014, the compatibility of which has to be assessed under the 2005 Aviation Guidelines.

(192)

With regard to the funds provided at privileged terms by the cash-pool, Germany considers that those funds were also used to finance infrastructure investments in 2009 to 2012.

(193)

In 2009 to 2012 investments amounting to EUR 46 million were carried out at Frankfurt Hahn airport (see Table 3). The amount of those investments is approximately equal to the funds drawn from the cash-pool during the same period. Moreover, during the period 2009 to 2012 the operating results (80) (including extraordinary revenues, that is to say revenues other than the airport's aeronautical and non-aeronautical revenues and revenues from the sale of land or of property) were positive (see Table 4). This suggests that the airport was in a position to cover its day-to-day operating costs and the funds provided by the cash-pool were used to finance the investments into airport infrastructure. Hence, the funds provided by the cash-pool constitute unlawful investment aid granted before 4 April 2014, the compatibility of which has to be assessed under the 2005 Aviation Guidelines. In this regard, the considerations set out in Section 6.5.3 also apply. In particular, as the amount of the funds drawn is smaller than the total investments, the aid can be considered to be proportional and necessary.

(194)

However, it should be noted that the funds drawn from the cash-pool were not dedicated for a specific purpose. Furthermore, the operating results (excluding extraordinary revenues, that is to say, revenues other than the airport's aeronautical and non-aeronautical revenues and revenues from the sale of land or of property) were negative in the period under consideration (see Table 4). This could indicate that the revenues from the airport's ordinary activity were not sufficient to cover its operating costs. Moreover, Germany has failed to demonstrate the mechanism by which it was ensured that the cash-pool funds would not be used for financing the airport's daily operations.

(195)

Given these circumstances, it cannot be excluded that the cash-pool funds were used to prevent the FFHG from running short of liquidity, which could have caused the airport operator to cut its investments or turn it into an undertaking in difficulty. Hence, the funds provided by the cash-pool could be considered to constitute unlawful operating aid granted before 4 April 2014 the compatibility of which has to be assessed under the 2014 Aviation Guidelines. This assessment is carried out below in Section 6.5.4.

6.5.4.   Compatibility of the investment aid pursuant to the 2005 Aviation Guidelines

(196)

According to point 61 of the 2005 Aviation Guidelines, the Commission must examine whether the following cumulative conditions are met:

(a)

the construction and operation of the infrastructure meets a clearly defined objective of common interest (regional development, accessibility, etc.);

(b)

the infrastructure is necessary and proportional to the objective which has been set;

(c)

the infrastructure has satisfactory medium-term prospects for use, in particular as regards the use of existing infrastructure;

(d)

all potential users of the infrastructure have access to it in an equal and non-discriminatory manner; and

(e)

the development of trade is not affected to an extent contrary to the Union interest.

(197)

In addition, State aid to airports — as any other State aid measure — must have an incentive effect and be necessary and proportional in relation to the aimed legitimate objective in order to be compatible.

(198)

Germany submitted that the investment aid in favour of FFHG complies with all the compatibility criteria contained in the 2005 Aviation Guidelines.

(a)   The aid contributes to a clearly defined objective of common interest

(199)

The investment aid in favour of FFHG aimed at financing the further conversion of the former US military base into a civilian airport and substantially developing the infrastructure of the airport. Those measures provided a significant contribution to the regional development and connectivity of the Hunsrück region and the creation of new jobs in an area economically hit by the closure of the US military base, as well as the decongestion of Frankfurt Main airport.

(200)

The Hunsrück region, as pointed out by Germany, is surrounded by a number of areas (such as Landkreis Birkenfeld), which were marked as regions in need of support in the framework of the ‘Gemeinschaftsaufgabe Verbesserung der regionalen Wirtschaftsstruktur’. Indeed, in the period under consideration, Landkreis Birkenfeld was at least partly considered to be a region with a gross domestic product (GDP) below the Union average (81).

(201)

The Commission considers that the development of Frankfurt Hahn airport also contributed significantly to the creation of new jobs in the Hunsrück region. As shown by Germany, taking into account all parts of the airport activities, Frankfurt Hahn airport created 3 063 jobs in the Hunsrück region in 2012 out of which 74 % were full-time positions and 90 % of those employees also live in this region.

(202)

Moreover, the development of Frankfurt Hahn airport had also positive indirect, induced and catalysing effects on the creation of jobs in the region as well as regional development in general through an increasing number of economic and touristic activities. According to the information provided by Germany, Frankfurt Hahn airport contributes significantly to the development of incoming (~ 33 % of passengers corresponding to approximately 1 million passengers in 2005) and outgoing tourism (~ 67 % of passengers) in the Land Rhineland-Palatinate. As pointed out by Germany, 88 % of the incoming passengers stay at least one night in the region and generated approximately 5,7 million overnight stays in 2005. Since 88 % of incoming tourists from Frankfurt Hahn stay at least one night and more than 80 % of those even stay two to 10 days, they generate a total turnover of about EUR 133,7 million per year. Moreover, incoming tourism generated around 11 000 jobs in Rhineland-Palatinate.

(203)

The aided investments at issue also helped to improve the accessibility of the area. Nevertheless, the duplication of unprofitable airports (or the creation of additional unused capacity) does not contribute to an objective of common interest. In this case, the Commission takes the view that the investment aid does not lead to such a duplication which would diminish the medium-term prospects for the use of existing infrastructure at other, neighbouring airports. Indeed, there are no other airports within 100 kilometres or 60 minutes travelling time from Frankfurt Hahn airport. The closest airports to Frankfurt Hahn are Frankfurt Main airport, which is located at 115 kilometres distance or 1 hour 15 minutes travelling time by car, and Luxembourg airport, which is located 1 hour and 30 minutes travelling time (111 kilometres) away.

(204)

Frankfurt Main airport is an international hub airport with a wide variety of destinations and is predominantly served by network carriers offering connecting traffic, whereas Frankfurt Hahn airport serves low-cost point-to-point flights. Traffic at Frankfurt Main airport has continuously increased since 2000, from 49,4 million passengers in 2000 to approximately 58 million in 2012. However, during that period growth has been affected by congestion problems and capacity constraints. As pointed out by Germany, the capacity limits of Frankfurt Main airport were constantly exceeded. Therefore, according to Germany, especially in the light of its 24-hour operating licence, Frankfurt Hahn airport played an important role in providing additional capacity in order to relieve the congestion at Frankfurt Main airport. In fact, until 2009 Fraport was the majority shareholder of FFHG, the operator of Frankfurt Hahn airport (2,7 million passengers in 2013, around 4 million passengers in 2007 at its peak) and the operator of Frankfurt-Main airport (58 million passengers and 2,1 million freight), and was as such pursuing a diversification strategy.

(205)

Luxembourg airport, which is the nearest airport to Frankfurt Hahn but still around 111 kilometres or 1 hour 30 minutes travelling time by car away, had around 1,7 million passengers in 2008 and experienced a rapid growth to 2,2 million in 2013. Even though Luxembourg airport is slightly smaller than Frankfurt Hahn airport in terms of passenger traffic, its freight activity is substantially larger, with 674 000 tonnes in 2013. It offers a variety of scheduled flights to European capitals and charter flights to leisure destinations. This selection of destinations to a large extent meets the needs of the employees of the financial and international institutions located in Luxembourg.

(206)

Saarbrücken airport is located around 128 kilometres away from Frankfurt Hahn airport which amounts to over 2 hours travelling time by car. In addition, Frankfurt Hahn is served mainly by low-cost carriers (Ryanair) and freight constitutes a rather important element in its business model whereas Saarbrücken airport offers mainly scheduled flights to national destinations and has only limited air freight transport.

(207)

With regard to Zweibrücken airport, Germany emphasised that the distance of 127 km to Frankfurt Hahn airport translates into a travelling time of 1 hour and 27 minutes by car or around 4 hours by train. Moreover, Germany submitted that, looking at passenger and air freight traffic between 2005 and 2012, no relationship of substitution between the airports can be deduced.

(208)

The Commission observes that there is a certain overlap in the activities of Frankfurt Hahn and Zweibrücken airports, as Zweibrücken airport is also engaged in handling air freight and the destinations served by Zweibrücken airport are predominantly for charter traffic. In this regard, the Commission notes that freight is usually more mobile than passenger transport (82). In general, a catchment area for freight airports is considered to have a radius of at least around 200 kilometres and 2 hours travelling time. Comments from the industry suggest that up to a half-day of trucking time (that is to say, up to 12 hours driving time by trucks) would in general be acceptable for freight forwarders to transport their goods (83). Moreover, charter traffic is also, in general, less time-sensitive and may accept travelling times of up to 2 hours by car.

(209)

At the same time it should be noted that, before Zweibrücken entered the market in 2006, Frankfurt Hahn airport was already a well-established airport with more than 3 million passengers and channelling 123 000 tonnes of freight. In view of the historical development of the two airports, their geographical location and the free capacity available at Frankfurt Hahn airport at the time when Zweibrücken airport entered the commercial aviation market in 2006, the Commission concludes that it is rather the opening of Zweibrücken airport which constituted an unnecessary duplication of infrastructure.

(210)

Therefore, the Commission concludes that the investments into Frankfurt Hahn airport do not constitute a duplication of existing non-profitable infrastructure. On the contrary, Frankfurt Hahn airport has played an important role in decongesting Frankfurt Main airport without limiting the latter's plans to expand. Without the investments into Frankfurt Hahn airport there was in fact a risk that the region would be underserved in terms of its transport needs.

(211)

In the light of the considerations in recitals 199 to 210, the Commission therefore concludes that the investment aid directed at the construction and operation of infrastructure at Frankfurt Hahn airport meets a clearly defined objective of common interest, namely regional economic development, creation of jobs and improvement of the accessibility of the region.

(b)   The infrastructure is necessary and proportionate to the objective

(212)

According to Germany, the investments were undertaken according to the needs (and were thus proportionate) and the constructed infrastructure was necessary for the airport in order to serve the connectivity and the development of the region and to decongest Frankfurt Main airport.

(213)

Based on the information provided by Germany, the Commission agrees that the financed investments were necessary and proportionate to the objective of common interest (see recital 68 and following). Indeed, without these investments the conversion of the former US base into a fully functioning civil aviation airport could not have been completed. The construction of passenger and freight facilities, aprons and modernisation of taxiways had to be carried out in order to further develop civil flight operations. Hence, the constructed infrastructure was necessary for the airport in order to serve the connectivity and the development of the region.

(214)

Also, the infrastructure project was undertaken only to the extent it was necessary to attain the goals set: while the infrastructure was built for a maximum passenger traffic of around 4 to 5 million passengers and 500 000 tonnes of freight, the traffic statistics displayed in Table 1 and Table 2 show that the passenger traffic steadily increased until 2007 to reach a record of 4 million passengers (following by a decline to 2,7 million in 2013 for the reasons set out in recital 219) and that the freight volume increased to more than 500 000 tonnes of freight in 2011. This means that the expected traffic demand largely corresponded to the actual demand and that the investments were not disproportionately large.

(215)

While it is important to avoid that investment constitutes a duplication of an existing unprofitable infrastructure, this is not the case here. As already explained in recitals 203 to 210, there are no other airports within 100 kilometres distance and 60 minutes travelling time, and even if a wider catchment area was to be considered there are no duplication effects. The closest airport is Frankfurt Main airport, which Frankfurt Hahn airport was intended to decongest.

(216)

In the light of these considerations, the Commission considers that this compatibility condition is met.

(c)   The infrastructure has satisfactory medium-term prospects for use

(217)

Germany submitted that before the decision to further develop the airport infrastructure was taken, traffic forecast studies were conducted by external experts in order to identify the traffic potential for Frankfurt Hahn airport.

(218)

The information submitted shows that at that time the external experts forecasted significant growth from 0,3 million passengers in 2000 to up to 3,8 million passengers by 2010 (see Figure 6 and Figure 7). With regard to freight development, the experts projected a development from 151 000 tonnes in 2001 to up to 386 000 tonnes in 2010 (see Figure 8), with the growth in the freight business between 2006 and 2010 coming from the freight flights diverted from Frankfurt Main airport due to curfew. However, these projections could only be fulfilled if the investments were undertaken to the planned extent.

(219)

The Commission notes that these traffic forecasts (see recital 218) were confirmed by the actual traffic development at Frankfurt Hahn airport (see Table 1 and Table 2). In 2007 Frankfurt Hahn airport served around 4 million passengers. Following a period of significant growth, air traffic in Germany and the Union in recent years has been negatively affected by the economic and financial crisis in 2008/2009, which resulted in a decrease in passenger air transport in Germany in 2009. The passenger development at Frankfurt Hahn airport was further impacted by the introduction of an air passenger tax in Germany in 2011. Currently Frankfurt Hahn airport serves around 2,7 million passengers p.a. With regard to freight, Frankfurt Hahn airport handled 565 000 tonnes of freight in 2011. Due to the bankruptcy of one of its clients, the airport processed only 447 000 tonnes in 2013.

(220)

In the light of these considerations, it can therefore be concluded that Frankfurt Hahn airport is already using most of its capacity and that the medium-term prospects for the use of the capacity were satisfactory.

(d)   Access to the infrastructure in an equal and non-discriminatory manner

(221)

All potential users of the infrastructure have access to the airport on equal and non-discriminatory terms. Indeed, the schedule of airport charges applicable at Frankfurt Hahn airport is publicly available and open to all potential and current users of the airport in a transparent and non-discriminatory manner. Any differences in airport charges actually paid for the use of the infrastructure were based on commercially justified differentiation (84).

(222)

Hence, the Commission considers that this condition is satisfied.

(e)   Trade is not affected contrary to common interest

(223)

According to point 39 of the 2005 Aviation Guidelines the category of an airport can provide an indication of the extent to which airports are competing with one another and therefore also the extent to which public funding granted to an airport may distort competition.

(224)

Within the standard catchment area of Frankfurt Hahn airport (1 hour travelling time by car or 100 kilometres distance) there are no other commercially exploited airports. Even if one were to extend the catchment area, the Commission considers that the aid does not create undue negative effects on competition and trade between Member States.

(225)

As far as Frankfurt Main airport (the closest airport at around 115 kilometres distance and 1 hour 15 minutes travelling time) is concerned, the investments at Frankfurt Hahn airport did not result in negative substitution effects. In fact, before getting involved in Frankfurt Hahn airport, Fraport was already the operator of Frankfurt Main airport, but was nevertheless investing in Frankfurt Hahn airport with a view to decongesting Frankfurt Main airport, as a future capacity overload was foreseeable for that hub. In particular, the ban on night flights at Frankfurt Main airport was one of the main factors to be taken into consideration as Frankfurt Hahn airport had a 24-hour operating licence.

(226)

Even though Frankfurt Hahn experienced significant growth in the period from 2000 until 2007, Figure 1 shows that in comparison to Frankfurt Main the traffic share remained very limited. From 2000 to 2003 Frankfurt Main airport experienced steady passenger growth from 48 million in 2000 to 54,2 million in 2007. Due to the economic crisis, Frankfurt Main experienced a slight decrease to 50,9 million in 2009, followed by a rapid increase to 58 million. With regard to the freight activities, Frankfurt Main airport experienced steady growth from 1,6 to 2,2 million tonnes in 2013.

(227)

As for other airports, the Commission has already explained that the investments at Frankfurt Hahn airport had no significant impact on competition and trade between Member States (85). This also applies to Zweibrücken airport, given that it is rather the latter that constitutes an unnecessary duplication of infrastructure (and would thus be responsible for any distortive effect on competition).

(228)

In addition, contrary to Frankfurt Main and Luxembourg airports, Frankfurt Hahn airport is not served by a train connection. Overall, no substitution effect on rail transport can be expected.

(229)

In view of the considerations in recitals 223 to 228, the Commission considers that any undue negative effects on competition and trade between Member States are limited to the minimum.

(f)   Incentive effect, necessity and proportionality

(230)

The Commission must establish whether the State aid granted to Frankfurt Hahn Airport has changed the behaviour of the beneficiary in such a way that it engaged in activity contributing to the achievement of the objective of common interest that (i) it would not have carried out without the aid; or (ii) it would have carried out in a more restricted or different manner. In addition, the aid is considered to be proportionate only if the same result could not be reached with less aid and less distortion. This means that the amount and intensity of the aid must be limited to the minimum needed for the aided activity to take place.

(231)

According to the information submitted by Germany, without the aid the investment could not have been realised. Germany submitted that the aid was necessary as it compensated only the costs of financing and a lower amount would have led to lower levels of investment.

(232)

Indeed, according to the financial results summarised in Table 3 and Table 4 the airport is still loss-making and not able to finance its investment costs. Therefore, it can be concluded that the aid was necessary to make investments in order to decongest the airport infrastructure and to meet the current requirements for modern airport infrastructure. Without the aid, Frankfurt Hahn airport would not have been able to meet the expected demand of airlines, passengers and freight forwarders and the level of the economic activity of the airport would have been reduced.

(233)

It should also be noted that the public support was granted in a period when FFHG realised very significant investments into the infrastructure (more than EUR 220 million in 2001-2012). Of this amount, EUR 46 million were invested during the period under consideration (2009 to 2012). It follows that the investment aid covered only a fraction of the overall investment costs and was limited to the difference between the interest rate paid for the funds and the market rate under which FFHG would have received those funds on the market. Also, the investment aid under consideration was granted in the form of a 100 % state guarantee and funds at preferential terms and not in the form of a direct grant.

(234)

The Commission therefore considers that the aid measure at stake had an incentive effect and that the amount of aid was limited to the minimum necessary for the aided activity to take place, and was thus proportionate.

Conclusion

(235)

On the basis of the above, the Commission concludes that the investment aid granted to Frankfurt Hahn airport is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty as it complies with the compatibility conditions laid down in point 61 of the 2005 Aviation Guidelines.

6.5.5.   Compatibility of operating aid pursuant to the 2014 Aviation Guidelines

(236)

Section 5.1 of the 2014 Aviation Guidelines sets out the criteria that the Commission will apply in assessing the compatibility of operating aid with the internal market pursuant to Article 107(3)(c) of the Treaty. According to point 172 of the 2014 Aviation Guidelines, the Commission will apply those criteria to all cases concerning operating aid, including pending notifications and unlawful non-notified aid cases.

(237)

According to point 137 of the 2014 Aviation Guidelines, unlawful operating aid granted before the date of the publication of the 2014 Aviation Guidelines — like the funds granted from the cash-pool insofar as they may have constituted operating aid (see recitals 185 and 186) — may be declared compatible with the internal market to the full extent of uncovered operating costs provided that the following cumulative conditions are met:

(a)

contribution to a well-defined objective of common interest: this condition is fulfilled, inter alia, if the aid increases the mobility of citizens of the Union and connectivity of the regions or facilitates regional development (86);

(b)

need for State intervention: the aid must be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver (87);

(c)

existence of incentive effect: this condition is fulfilled if it is likely that, in the absence of operating aid, and taking into account the possible presence of investment aid and the level of traffic, the level of economic activity of the airport concerned would be significantly reduced (88);

(d)

proportionality of the aid amount (aid limited to the minimum necessary): in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place (89);

(e)

avoidance of undue negative effects on competition and trade  (90).

(a)   Contribution to a well-defined objective of common interest

(238)

According to Section 5.1.2(a) of the 2014 Aviation Guidelines, in order to give airports time to adjust to new market realities and to avoid any disruptions in the air traffic and connectivity of the regions, operating aid to airports will be considered to contribute to the achievement of an objective of common interest, if it: (i) increases the mobility of Union citizens and connectivity of regions by establishing access points for intra-Union flights; (ii) combats air traffic congestion at major Union hub airports; or (iii) facilitates regional development.

(239)

In the light of the considerations in recitals 199 to 204, the Commission considers that the continued operation of Frankfurt-Hahn airport increased the mobility of Union citizens and connectivity of regions by establishing an access point for intra-Union flights in the Hunsrück region. In addition, the continued operation of the airport facilitated the regional development of the Hunsrück region and the creation of new jobs. Moreover, the operation and development of Frankfurt Hahn airport also served to decongest Frankfurt Main airport.

(240)

The Commission therefore concludes that the measure at stake meets a clearly defined objective of common interest.

(b)   Need for State intervention

(241)

According to Section 5.1.2(b) of the 2014 Aviation Guidelines, in order to assess whether State aid is effective in achieving an objective of common interest, it is necessary to identify the problem to be addressed. In this respect, any State aid to an airport must be targeted towards a situation where aid can bring about a material improvement that the market cannot deliver itself.

(242)

The Commission notes that Frankfurt Hahn airport is a regional airport with approximately 2,7 million passengers p.a. It has high fixed operating costs and under present market conditions it is not able to cover its own operating costs. Therefore, there is a need for State intervention (see point 89 of the 2014 Aviation Guidelines).

(c)   Appropriateness of the aid measures

(243)

According to Section 5.1.2(c) of the 2014 Aviation Guidelines, any aid measure to an airport must be an appropriate policy instrument to address the objective of common interest. The Member State must, therefore, demonstrate that no other less distortive policy instruments or aid instruments could have allowed the same objective to be reached.

(244)

According to Germany, the aid measures at stake are appropriate to address the intended objective of common interest that could not have been achieved by another less distortive policy instrument.

(245)

In this case the aid amount (the difference between the market rate for the funds provided by the cash-pool and the actual rate) stayed below the uncovered operating losses (see Table 4, Ebitda excluding the extraordinary revenue of the airport) actually incurred and was limited to the minimum necessary as it was granted only as a repayable loan and not as a direct grant. No other policy measure would allow the airport to continue its operation. Hence, the compensation of losses is limited to the minimum and does not provide for any profits.

(246)

In view of recitals 244 and 245, the Commission considers that the measures at stake were appropriate to reach the desired objective of common interest.

(d)   Existence of incentive effect

(247)

According to Section 5.1.2(d) of the 2014 Aviation Guidelines, operating aid has an incentive effect if it is likely that, in the absence of operating aid, the level of economic activity of the airport would be significantly reduced. This assessment needs to take into account the presence of investment aid and the level of traffic at the airport.

(248)

Without the aid the scale of the operations at Frankfurt Hahn airport would be severely impacted and reduced, leading eventually to the market exit of the airport due to uncovered operating losses.

(249)

In view of the above, the Commission considers that the aid measures at stake had an incentive effect.

(e)   Proportionality of the aid amount (aid limited to a minimum)

(250)

According to Section 5.1.2(e) of the 2014 Aviation Guidelines, in order to be proportionate, operating aid to airports must be limited to the minimum necessary for the aided activity to take place.

(251)

In this case, the aid amount was limited to the extent of uncovered operating cost of capital, as it compensated only the costs actually incurred.

(252)

Therefore, the Commission considers that the amount of the operating aid in this case was proportionate and limited to the minimum necessary for the aided activity to take place.

(f)   Avoidance of undue negative effects on competition and trade between Member States

(253)

According to Section 5.1.2(f) of the 2014 Aviation Guidelines, when assessing the compatibility of operating aid account will be taken of the distortions of competition and the effects on trade.

(254)

Within the standard catchment area of Frankfurt Hahn airport (1 hour travelling time by car or 100 kilometres distance) there are no commercially exploited airports. Even if this standard catchment area was to be further extended to other airports in the proximity of Frankfurt Hahn airport, as demonstrated in recitals 224 and 228, there are no undue negative effects on competition between the airports located in the proximity of Frankfurt Hahn airport (that is Frankfurt Main, Luxembourg and Saarbrücken airports).

(255)

In view of the above, the Commission considers that any undue negative effects on competition and trade between Member States due to the operating aid granted in favour of FFHG are limited to the minimum.

Conclusion

(256)

In light of the considerations in recitals 238 to 255, the Commission concludes that the measures are compatible with the internal market on the basis of Article 107(3)(c) of the Treaty.

7.   CONCLUSION

(257)

In the light of the considerations in recitals 99 to 124, the Commission considers that the credit line provided by the cash-pool to FFGH by Land Rhineland-Palatinate constitutes State aid within the meaning of Article 107(1) of the Treaty.

(258)

In the light of the considerations in recitals 127 to 138, the Commission considers that the state guarantee issued by Land Rhineland-Palatinate securing 100 % of the outstanding ISB loans constitutes State aid within the meaning of Article 107(1) of the Treaty.

(259)

In the light of the considerations in recitals 140 to 169, the Commission concludes that ISB loans numbers 1, 3 and 4 were granted at rates that can be deemed in line with market conditions. Hence, given that the cumulative criteria in Article 107(1) of the Treaty are not fulfilled, the Commission considers that these loans do not constitute State aid within the meaning of Article 107(1) of the Treaty.

(260)

In light of the considerations in recitals 140 to 169 above, the Commission concludes that ISB loans numbers 2 and 5 were granted below the benchmark rate. Since the other criteria pursuant in Article 107(1) of the Treaty are also fulfilled, those loans constitute State aid.

(261)

As the credit line and the funds provided by the cash-pool, the 100 % state guarantee and ISB loans numbers 2 and 5 have already been put at the disposal of FFHG, the Commission considers that Germany has not respected the prohibition of Article 108(3) of the Treaty.

(262)

In the light of the considerations in recitals 199 to 232, the Commission concludes that the investment aid granted to Frankfurt Hahn airport is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty as it complies with the compatibility conditions laid down in point 61 of the 2005 Aviation Guidelines.

(263)

In the light of the considerations in recitals 238 to 255, the Commission concludes that the funds provided by the cash-pool at privileged terms comply with the compatibility conditions for operating aid laid down in point 137 of the 2014 Aviation Guidelines and are compatible with the internal market on the basis of Article 107(3)(c) of the Treaty.

(264)

The Commission notes that Germany accepts the adoption of the decision in the English language,

HAS ADOPTED THIS DECISION:

Article 1

The State aid, unlawfully put into effect by Germany in breach of Article 108(3) of the Treaty in favour of Flughafen Frankfurt Hahn GmbH between 2009 and 2012 by means of the grant of a 100 % guarantee on loans provided by Investitions- und Strukturbank of Rhineland-Palatinate, loans provided by Investitions- und Strukturbank of Rhineland-Palatinate on 31 August 2009 amounting to EUR 20,0 million and on 30 September 2009 amounting to EUR 6,8 million as well as allowing Flughafen Frankfurt Hahn GmbH to participate in Land Rhineland-Pfalz's cash-pool and draw loans up to EUR 45 million at privileged terms from that cash-pool, is compatible with the internal market.

Article 2

The loans granted by Investitions- und Strukturbank of Rhineland-Palatinate to Flughafen Frankfurt Hahn GmbH between 15 July 2007 and 30 September 2009 amounting to a total of EUR 46,8 million do not constitute State aid within the meaning of Article 107(1) of the Treaty.

Article 3

This Decision is addressed to the Federal Republic of Germany.

Done at Brussels, 1 October 2014.

For the Commission

Joaquín ALMUNIA

Vice-President


(1)  With effect from 1 December 2009, Articles 87 and 88 of the EC Treaty have become Articles 107 and 108, respectively, of the Treaty on the Functioning of the European Union (‘Treaty’). The two sets of Articles are in substance identical. For the purposes of this Decision references to Articles 107 and 108 of the Treaty should be understood as references to Articles 87 and 88 of the EC Treaty when appropriate. The Treaty also introduced certain changes in terminology, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the Treaty will be used throughout this Decision.

(2)  OJ C 216, 21.7.2012, p. 1.

(3)  Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 108 of the treaty on the functioning of the European Union (OJ L 83, 27.3.1999, p. 1).

(4)  See footnote 2.

(5)  Communication from the Commission — Guidelines on State aid to airports and airlines (OJ C 99, 4.4.2014, p. 3).

(6)  Application of Article 92 and 93 of the EC Treaty and Article 61 of the EEA Agreement to State Aids in the Aviation Sector (OJ C 350, 10.12.1994, p. 5).

(7)  Community guidelines on financing of airports and start-up aid to airlines departing from regional airports (OJ C 312, 9.12.2005, p. 1).

(8)  OJ C 113, 15.4.2014, p. 30.

(*)  Confidential information

(9)  Hereafter in this Decision the term ‘Fraport’ is used to mean both ‘FAG’ prior to the change of the business name and ‘Fraport AG’ thereafter.

(10)  Pursuant to Section 7(3) of the purchase agreement this figure could be reduced, such as in case the costs of FFHG for noise protection would exceed a certain ceiling.

(11)  Land Hesse held 45,24 % of Fraport's shares, Stadtwerke Frankfurt am Main Holding GmbH (owned for 100 % by the municipality Frankfurt am Main) held 28,89 % and the Federal Republic of Germany held 25,87 %.

(12)  Ryanair is an Irish airline and Member of the European Low Fares Airlines Association. The business of the airline is linked with secondary, regional airports. The airline operates currently approximately 160 European destinations. Ryanair has a homogenous fleet consisting of Boeing 737-800 aircraft with 189 seats.

(13)  Wizz Air is a Hungarian airline and Member of the European Low Fares Airlines Association. Wizz Air group consists of three operating companies, namely Wizz Air Hungary, Wizz Air Bulgaria and Wizz Air Ukraine. The business model of the airline is linked with secondary, regional airports. The airline operates currently approximately 150 European destinations. Wizz Air has a homogenous fleet, which consists of Airbus A 320 aircraft with 180 seats.

(14)  Communication from the Commission on the revision of the method for setting the reference and discount rates of 12 December 2007 (OJ C 14, 19.1.2008, p. 6).

(15)  KMV RiskCalc Germany 3.1; this model is used for estimating the credit rating of non-traded companies based on their financial data. Moody's KMV RiskCalc Germany 3.1 calculates expected default frequency (or probability of default) of undertakings not traded on the stock exchange on the basis of financial statements data.

(16)  In the light of the explanations in recital 46, a short-term duration of the loans provided under the cash-pool was assumed for the credit ratings.

(17)  Taking into account the ownership structure.

(18)  This corresponds to a rating of [BB+ to B-] on the Standard & Poor's rating scale. This rating category means the borrower is […].

(19)  This corresponds to a rating of [BBB- to B] on the Standard & Poor's rating scale. This rating category means that the borrower is […].

Source: KPMG Memorandum of 7 June 2013.

(20)  In this respect Germany referred to case C-30/59 De gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961] ECR 00003, p. 3, 43.

(21)  Deutsche Bank, Margen-Indikation für geplante Refinanzierung bestehender Verschuldung, 3 September 2009.

(22)  Point 3.2.1 of the Margen-Indikation für geplante Refinanzierung bestehender Verschuldung: ‘…, gehen wir von einer Einstufung der Gesellschaft im […].’ The [<BBB+] rating category includes all ratings that are below [BBB+] of the Standard and Poor's rating scale.

(23)  However, Deutsche Bank has not provided the adjusted rating for FFHG.

(24)  This rate is calculated as follows: [5 to 25] bps — risk margin paid on 5-year EUR bonds of German Länder, [5 to 25] bps — on top of the above margin because of the indirect risk because of a state-owned company, [5 to 25] bps — for the limited tradability of the debt.

(25)  Rating Ergebnis FFHG by Volksbank Hunsrück-Nahe eG. This rating corresponds to [B to BB] on the Standard and Poor's rating scale (see Rating-Broschüre Finanzstandort Deutschland, 2010, p. 18).

(26)  Ratingunterlagen Kreissparkasse Birkenfeld. This rating corresponds to [B- to BB-] on the Standard and Poor's rating scale (see Rating-Broschüre Finanzstandort Deutschland, 2010, p. 18).

(27)  Taking into account the ownership structure.

Source: KPMG Memorandum of 7 June 2013.

(28)  Commission Notice on the application of Article 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008, p. 10).

(29)  Deutsche Bank assesses two alternative scenarios for the financing of FFHG — one without collateralisation and one with a 100 % state guarantee. It estimates that in the first case (without collateral) the applicable risk margin for a 5-year loan would be between [1,30 % and 2,05 %] p.a. In the second case (with a guarantee covering 100 % of the claims) the applicable risk margin would be between [0,25 % and 0,7 %] p.a. The difference in the margins between the two cases would provide an indication for the price of the guarantee. The difference estimated by Deutsche Bank is in the range of [0,6 % to 1,8 %] p.a. ([1,3 % – 0,7 % = 0,6 % and 2,05 % – 0,25 % = 1,8 %]).

(30)  GemeinschaftsaufgabeVerbesserung der regionalen Wirtschaftsstruktur (GRW) Gesetz’ of 6 October 1969 (BGBl. I S. 1861), which was last amended by Article 8 of the Act of 7 September 2007 (BGBl. I, p. 2246).

(31)  Flughafen Frankfurt Hahn — Regionaloekonomische Effekte, ZFL Studie, 3/2007.

(**)  Submission of Germany, September 2014.

(32)  Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 244, 1.10.2004, p. 2).

(33)  Case C-35/96 Commission v Italy [1998] ECR I-3851; Case C-41/90 Höfner and Elser [1991] ECR I-1979; Case C-244/94 Fédération Française des Sociétés d'Assurances v Ministère de l'Agriculture et de la Pêche [1995] ECR I-4013; Case C-55/96 Job Centre [1997] ECR I-7119.

(34)  Case 118/85 Commission v Italy [1987] ECR 2599; Case 35/96 Commission v Italy [1998] ECR I-3851.

(35)  Leipzig/Halle judgment, in particular paragraphs 93-94; confirmed by case C-288/11 P Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission [2012] ECLI:EU:C:2012:821; see also Case T-128/89 Aéroports de Paris v Commission [2000] ECR II-3929, confirmed by case C-82/01P Aéroports de Paris v Commission [2002] ECR I-9297 and case T-196/04 Ryanair v Commission (‘Charleroi judgment’) [2008] ECR II-3643.

(36)  Cases C-159/91 and C-160/91 Poucet v AGV and Pistre v Cancave [1993] ECR I-637.

(37)  Leipzig-Halle judgment, paragraphs 42-43.

(38)  Case C-482/99 France v Commission (‘Stardust Marine’) [2002] ECR I-4397.

(39)  Joined Cases T-267/08 and T-279/08, Nord-Pas-de-Calais [2011] ECR II-01999, paragraph 108.

(40)  Submission of Germany dated 24 April 2014, response to question 4, p. 3.

(41)  Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as financial transparency within certain undertakings (OJ L 318, 17.11.2006, p. 17).

(42)  Case C-39/94 Syndicat français de l'Express international (SFEI) and others v La Poste and others [1996] ECR I-3547, paragraph 60 and case C-342/96 Kingdom of Spain v Commission of the European Communities [1999] ECR I-2459, paragraph 41.

(43)  Case 173/73 Italian Republic v Commission of the European Communities [1974] ECR 709, paragraph 13.

(44)  Case C-482/99 France v Commission (‘Stardust Marine’) [2002] ECR I-4397, paragraph 69.

(45)  According to Germany the interest rate corresponded approximately to the European overnight index average.

(46)  Full rating report of the Land Rhineland-Palatinate (including Land's rating history since 1999) by Fitch rating agency, July 2014, available under http://www.fm.rlp.de/fileadmin/fm/downloads/finanzen/kapitalmarkt/FRR_RP_22_07_2014.pdf, shows that the Land was constantly rated at AAA on the rating scale.

(47)  The Land bears the risk of FFHG defaulting, without obtaining a compensatory payment in return.

(48)  Case T-214/95 Het Vlaamse Gewest v Commission [1998] ECR II-717.

(49)  See Section 2.1.

(50)  For example Leipzig/Halle airport was in competition with Vatry airport (France) for the establishment of the DHL European hub. See Leipzig/Halle judgment, paragraph 93.

(51)  Response of Liège airport to the public consultation on the 2014 Aviation Guidelines.

(52)  See footnote 33.

(53)  See footnote 34.

(54)  [1,3 % – 0,7 % = 0,6 % and 2,05 % – 0,25 % = 1,8 %].

(55)  Loss given default (LGD) between 30 % and 60 %.

(56)  […]

(57)  […]

(58)  […]

(59)  See e.g. Oxera, Estimating the cost of capital for Dutch water companies, 2011 (p. 3). See also Bloomberg data on underwriting fees for bond issuance.

(60)  Communication of the Commission to the Member States: application of Articles 92 and 93 of the EEC Treaty and of Article 5 of Commission Directive 80/723/CEE to public undertakings in the manufacturing sector (OJ C 307, 13.11.1993, p. 3), paragraph 11. That communication deals specifically with the manufacturing sector, but is in principle also applicable to other economic sectors. See also Case T-16/96 Cityflyer [1998] ECR II-757, paragraph 51.

(61)  Commission Decision 2013/693/EU of 3 October 2012 on the measure SA.23600 — C 38/08 (ex NN 53/07) — Germany — Financing arrangements for Munich Airport Terminal 2 (OJ L 319, 29.11.2013, p. 8); and Commission Decision (EU) 2015/1469 of 23 July 2014 on State aid SA.30743 (2012/C) (ex N 138/10) — Germany — Financing of infrastructure projects at Leipzig/Halle airport (2) (OJ L 232, 4.9.2015, p. 1).

(62)  The swap rate is the longer maturity equivalent to the inter-bank offered rate (IBOR rate). It is used in the financial markets as a benchmark rate for establishing the funding rate.

(63)  A credit default swap (CDS) is a (tradable) credit derivative contract between two counterparties, the protection buyer and the protection seller, transferring the credit risk on an underlying reference entity from the protection buyer to the protection seller. The protection buyer pays every period a premium to the protection seller until maturity of the CDS contract or until a predefined credit event occurs on the underlying reference entity (whichever occurs first). The periodic premium paid by the protection buyer (expressed as a percentage or in terms of basis points of the protected amount, the ‘notional’) is called the CDS spread. CDS spreads can be used as a close proxy for the price of credit risk.

(64)  See footnote 54.

(65)  Bloomberg code EUSA4.

(66)  Bloomberg code EUSA1.

(67)  Bloomberg code EUSA3.

(68)  Loan number 1 was drawn on 14 July 2009, loan number 3 on 28 August 2009, and loan number 4 on 8 September 2009.

(69)  Source: Bloomberg.

(70)  […]

(71)  […]

(72)  […]

(73)  Case T-109/01 Fleuren Compost v Commission [2004] ECR II-127.

(74)  Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (OJ C 249, 31.7.2014, p. 1).

(75)  OJ C 119, 22.5.2002, p. 22.

(76)  Point 173 of the 2014 Aviation Guidelines.

(77)  Point 172 of the 2014 Aviation Guidelines.

(78)  Point 25(v) of the 2014 Aviation Guidelines.

(79)  The overview is based on the indications in the ISB loan agreements as to the purpose of the respective loans and the investment amounts.

(80)  Expressed in ‘Earnings before interest, taxes, depreciation and amortisation’ (‘Ebitda’).

(81)  Commission decision of 8 November 2006 in State aid case N459/2006 — Germany — German regional aid map 2007-2013 (OJ C 295, 5.12.2006, p. 6).

(82)  See footnote 45.

(83)  See footnote 46.

(84)  Commission decision of 1 October 2014 in State aid case SA.21211 — Germany — Frankfurt Hahn airport and Ryanair, not yet published in the Official Journal.

(85)  As regards Frankfurt Main and Luxembourg airports, the Commission further notes that the business travel segment occupies a significant market share at these airports, while it only represents a comparatively limited share at Frankfurt Hahn airport.

(86)  Points 137, 113 and 114 of the 2014 Aviation Guidelines.

(87)  Points 137 and 116 of the 2014 Aviation Guidelines.

(88)  Points 137 and 124 of the 2014 Aviation Guidelines.

(89)  Points 137 and 125 of the 2014 Aviation Guidelines.

(90)  Points 137 and 131 of the 2014 Aviation Guidelines.


24.5.2016   

EN

Official Journal of the European Union

L 134/46


COMMISSION DECISION (EU) 2016/789

of 1 October 2014

on the State aid SA.21121 (C29/08) (ex NN 54/07) implemented by Germany concerning the financing of Frankfurt Hahn airport and the financial relations between the airport and Ryanair

(notified under document C(2014) 6853)

(Only the English text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) (1) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above (2) and having regard to their comments,

Whereas:

1.   PROCEDURE

(1)

Between 2003 and 2006, the Commission received complaints from various parties alleging that Ryanair plc (‘Ryanair’ (3)) as well as the Frankfurt Hahn airport operator Flughafen Frankfurt-Hahn GmbH (hereinafter: ‘FFHG’) had been granted unlawful State aid by the company Fraport AG and the Länder (Federal States) of Rhineland-Palatinate and Hesse. The complainant provided further information on 22 September 2003 and 1 June 2006.

(2)

By letters dated 25 September 2006 and 9 February 2007, the Commission requested information from Germany. Germany responded by letters dated 20 December 2006 and 29 June 2007 respectively.

(3)

By letter dated 17 June 2008, the Commission informed Germany of its decision to initiate the procedure provided for in Article 108(2) of the Treaty with regard to the financing of FFHG and its financial relations with Ryanair (the ‘2008 opening decision’). Germany transmitted its comments on 27 October 2008.

(4)

The 2008 opening decision was registered under case number SA.21121 (C29/08). The 2008 opening decision was published in the Official Journal of the European Union  (4) on 17 January 2009. The Commission invited interested parties to submit their comments on the measures in question within 1 month of the date of publication.

(5)

The Commission received comments from Deutsche Lufthansa AG (‘Lufthansa’), the Federal Association of German Air Carriers (Bundesverband der Deutschen Fluggesellschaften, ‘BDF’), Ryanair, Société Air France SA (‘Air France’) and the Association of European Airlines (‘AEA’). It forwarded the comments to Germany by letter dated 16 April 2009. Germany was given the opportunity to respond to them within 1 month and transmitted its comments and more information on 1 July 2009.

(6)

By letter of 4 March 2011, Lufthansa provided further information with regard to the 2008 opening decision addressing new alleged State aid measures.

(7)

By letter dated 18 March 2011 the Commission forwarded the complaint to Germany and requested further information on the new allegations concerning State aid measures. Germany replied by letters dated 19 May 2011 and 23 May 2011.

(8)

However, those replies were incomplete. Therefore, by letter dated 6 June 2011 the Commission sent a reminder pursuant to Article 10(3) of Council Regulation (EC) No 659/1999 (5). Germany responded by letters dated 14 June 2011 and 16 June 2011.

(9)

By letter dated 13 July 2011 the Commission informed Germany of its decision to initiate the procedure provided for in Article 108(2) of the Treaty with respect to the credit line provided to FFHG by the cash pooling facility of Land Rhineland-Palatinate, the loan provided to FFHG by Investitions-und Strukturbank of Land Rhineland-Palatinate (‘ISB’) and the guarantee for the ISB loan provided to FFHG by Land Rhineland-Palatinate (the ‘2011 opening decision’). The 2011 opening decision was registered under case number SA.32833 (2011/C). The 2011 opening decision was published in the Official Journal of the European Union on 21 July 2012 (6).

(10)

By letter dated 20 February 2012 the Commission requested further information regarding the 2008 opening decision. Germany responded by letter dated 16 April 2012. By letter of 27 July 2012, the Commission again requested further information. Germany replied by letter dated 4 September 2012.

(11)

By a letter dated 25 February 2014 the Commission informed Germany of the adoption of the Commission guidelines on State aid to airports and airlines (7) (the ‘2014 Aviation Guidelines’) on 20 February 2014. The Commission informed Germany that those guidelines would become applicable from the date of their publication in the Official Journal of the European Union. It gave Germany the opportunity to comment on those guidelines and their possible application to the present case within 20 working days. By letter dated 17 March 2014 the Commission reminded Germany that, in case it would not receive any comments within the deadline of 20 working days, the Commission would consider that Germany had no comments.

(12)

By letters dated 23 March 2014 and 4 April 2014 the Commission requested further information from Germany. Germany replied by letters dated 17 April 2014, 24 April 2014 and 9 May 2014.

(13)

The 2014 Aviation Guidelines were published in the Official Journal of the European Union on 4 April 2014. They replaced the 1994 Aviation Guidelines (8) as well as the 2005 Aviation Guidelines (9).

(14)

On 15 April 2014 a notice was published in the Official Journal of the European Union inviting Member States and interested parties to submit comments on the application of the 2014 Aviation Guidelines in this case within 1 month of their publication date (10). Lufthansa and Transport & Environment submitted observations. By letter dated 26 August 2014, the Commission forwarded those observations to Germany. By letter dated 3 September 2014, Germany informed the Commission that it had no observations.

(15)

By letter dated 17 June 2014, Germany agreed exceptionally to have this decision adopted and notified in English only.

2.   CONTEXT OF THE MEASURES

2.1.   CONVERSION OF THE AIRPORT AND ITS OWNERSHIP STRUCTURE

(16)

Frankfurt Hahn airport is located in Land Rhineland-Palatinate, approximately 120 km west of the city of Frankfurt/Main. Frankfurt Hahn airport was a US military airbase until 1992. Subsequently, it was converted into a civil airport. It holds a 24-hour operating licence.

(17)

Holding Unternehmen Hahn GmbH & Co. KG (‘Holding Hahn’), a public private partnership between Wayss & Freytag and Land Rhineland-Palatinate, acquired ownership of the infrastructure of Frankfurt Hahn airport from Germany on 1 April 1995. Between 1995 and 1998, this public private partnership developed the airport with the goal of developing there an industrial and commercial area. According to Germany, when the partnership between Wayss & Freytag and Land Rhineland-Palatinate did not turn out to be successful, on 1 January 1998, Flughafen Frankfurt/Main GmbH (‘Fraport’) (11) started getting involved in the project and eventually took over the operation of the airport.

(18)

According to Germany, Fraport, who was already operating and managing the international Frankfurt Main airport, located approximately 115 km from Frankfurt Hahn airport, got involved for several strategic reasons. Firstly, Germany stated that Frankfurt Hahn airport was the only airport in the proximity of Frankfurt Main airport which had the potential of becoming a fully-fledged international airport. As Frankfurt Main airport was already at its full capacity at that moment, there was the potential for a second profitable airport in the region. Secondly, Frankfurt Hahn airport was then the only German airport with a 24 hour operation licence, especially useful for cargo and freight flights. Thirdly, the runway was fully equipped and could be used in all weather conditions. Furthermore, Germany submitted that the owners of Schiphol airport were also thinking about acquiring Frankfurt Hahn airport, and hence by taking over the operation of Frankfurt Hahn airport it was possible for Fraport to keep out an unwanted competitor.

(19)

Fraport purchased 64,90 % of the shares in the operator Flughafen Hahn GmbH & Co. KG Lautzenhausen (‘FFHG & Co KG’) for the price of […] (*). Payment of part of the purchase price (EUR […]) was due on 31 December 2007, under certain conditions (12). In August 1999, Fraport acquired 73,37 % of the shares of Holding Hahn and 74,90 % of the shares of its general partner Holding Unternehmen Hahn Verwaltungs GmbH for the price of EUR […]. Thereby Fraport effectively became the new partner of Land Rhineland-Palatinate.

(20)

Fraport's focus at Frankfurt Hahn airport was to systematically develop the airport's passenger and cargo business. In that respect, Fraport was one of the first undertakings to apply a business model which aimed especially at attracting low-cost airlines. On that basis, Fraport concluded a new profit and loss transfer agreement with Holding Hahn upon conversion of the latter into a German limited liability company (Gesellschaft mit beschränkter Haftung,‘GmbH’). The conversion and the conclusion of that agreement took place on 24 November 2000.

(21)

Subsequently, Holding Hahn and FFHG & Co KG merged to form Flughafen Hahn GmbH. Land Rhineland-Palatinate held 26,93 % and Fraport 73,07 % of the shares in the new company. Later, the business name of the company was again changed to Flughafen Frankfurt-Hahn GmbH (‘FFHG’). In 2001, the two shareholders, Fraport and Land Rhineland-Palatinate, injected fresh capital into FFHG (see detailed description in Section 3).

(22)

Until 11 June 2001, 100 % of the shares in Fraport were held by public shareholders (13). On 11 June, Fraport was floated on the stock exchange and 29,71 % of its shares were sold to private shareholders, with 70,29 % of shares remaining with the public shareholders.

(23)

In November 2002, Land Rhineland-Palatinate, Land Hesse, Fraport and FFHG concluded an agreement on the further development of Frankfurt Hahn airport. That agreement provided for a second increase of the authorised capital. On that occasion, and Land Hesse acceded to FFHG as a third shareholder. Fraport then owned 65 % of the shares, Land Hesse and Land Rhineland-Palatinate held 17,5 % each. That ownership structure remained unchanged until 2009, when Fraport sold all of its shares to Land Rhineland-Palatinate, which has, since then, held a 82,5 % majority share. The remaining 17,5 % are still held by Land Hesse.

2.2.   PASSENGER AND FREIGHT TRAFFIC DEVELOPMENT AND AIRPORTS IN THE VICINITY

(24)

The passenger traffic at the airport increased from 29 289 in 1998 to 4 million in 2007 and decreased to approximately 2,7 million in 2013 (see Table 1). The airport is currently served by Ryanair, Wizz Air (14) and other airlines. Ryanair's passenger share amounted to approximately [80-100 %] in 2013.

Table 1

Passenger development at Frankfurt Hahn airport in 1998 to 2013

Year

Number of passengers

Number of Ryanair passengers

1998

29 289

0

1999

140 706

89 129

2000

380 284

318 664

2001

447 142

397 593

2002

1 457 527

1 231 790

2003

2 431 783

2 341 784

2004

2 760 379

2 668 713

2005

3 079 528

2 856 109

2006

3 705 088

3 319 772

2007

4 015 155

3 808 062

2008

3 940 585

3 821 850

2009

3 793 958

3 682 050

2010

3 457 540

[2 766 032 -3 457 540 ]

2011

2 894 363

[2 315 490 -2 894 363 ]

2012

2 791 185

[2 232 948 -2 791 185 ]

2013

2 667 529

[2 134 023 -2 667 529 ]

(25)

Frankfurt Hahn airport has also experienced growth in air freight. The air freight at the airport increased from approximately 16 000 tonnes in 1998 to approximately 286 000 tonnes at its peak in 2011, with a subsequent decrease to approximately 151 000 tonnes in 2013 (see Table 2). The total freight, including freight forwarders, handled at the airport amounted to approximately 447 000 tonnes in 2013.

Table 2

Cargo development at Frankfurt Hahn airport in 1998 to 2013

Year

Total air freight in tonnes

Total freight including freight forwarder in tonnes

1998

16 020

134 920

1999

43 676

168 437

2000

75 547

191 001

2001

25 053

133 743

2002

23 736

138 131

2003

37 065

158 873

2004

66 097

191 117

2005

107 305

228 921

2006

123 165

266 174

2007

125 049

289 404

2008

179 375

338 490

2009

174 664

322 170

2010

228 547

466 429

2011

286 416

565 344

2012

207 520

503 995

2013

152 503

446 608

(26)

The following airports are located in the proximity of Frankfurt Hahn airport:

(i)

Frankfurt Main airport (~ 115 kilometres from Frankfurt Hahn airport, ~ 1 hour 15 minutes travelling time by car) is an international hub airport with a wide variety of destinations, ranging from short to long-haul. It is predominantly served by network carriers offering connecting traffic, although it also provides point-to-point connections and charter flights. Besides passenger traffic (approximately 58 million in 2013), Frankfurt Main airport also handles air freight (approximately 2 million tonnes in 2013). Figure 1 shows the development of traffic at Frankfurt Main and Frankfurt Hahn airports in 2000-2012.

(ii)

Luxembourg airport (~ 111 kilometres from Frankfurt Hahn airport, ~ 1 hour 30 minutes travelling time by car) is an international airport providing a wide variety of destinations. In addition to passenger traffic (approximately 2,2 million in 2013), it also served 673 500 tonnes of air freight.

(iii)

Zweibrücken airport (~ 128 kilometres from Frankfurt Hahn airport, ~ 1 hour 35 minutes travelling time by car).

(iv)

Saarbrücken airport (~ 128 kilometres from Frankfurt Hahn airport, ~ 1 hour 35 minutes travelling time by car).

(v)

Köln-Bonn airport (~ 175 kilometres from Frankfurt Hahn airport, ~ 1 hour 44 minutes travelling time by car).

Figure 1

Passenger traffic development at Frankfurt Main and Frankfurt Hahn airports in 2000-2012

Image

2.3.   OVERVIEW OF INVESTMENTS UNDERTAKEN BY FFHG AND ITS FINANCIAL RESULTS

(27)

Table 3 provides an overview of investments undertaken by FFHG from 2001 to 2012, amounting in total to approximately EUR 216 million.

Table 3

Overview of investments undertaken from 2001 to 2012

In 1 000 EUR

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Total 2001-2012

Investments into infrastructure and equipment

Anlagenzugänge inkl. Umbuchungen

Land

3 174,00

6 488

 

2 994

4 284

3 086

8 613

593

 

[…]

 

 

 

Terminal

 

2 519

3 310

 

 

 

 

251

 

 

 

 

 

Cargo Hangar

 

 

3 850

 

3 222

 

 

 

 

 

 

 

 

Office building

 

 

 

 

 

 

 

2 428

 

[…]

 

 

 

Other infrastructure investments

 

 

10 194

1 152

 

 

13 275

 

 

[…]

[…]

[…]

 

Apron

1 008,30

5 684

 

 

3 394

 

10 224

2 848

 

[…]

[…]

 

 

Other infrastructure

1 502,20

3 848

2 071

2 692

3 911

1 761

1 558

2 608

384

[…]

[…]

[…]

 

Immaterial assets (e.g. IT)

6,1

14,50

28

219

487

45

170

121

20

[…]

[…]

[…]

7 108

Equipment

8 208,89

1 097,09

12 308,42

1 814,00

2 294,54

20 232

7 550

3 823

359

[…]

[…]

[…]

75 550

Total

13 899

19 650

31 761

8 871

17 592

25 123

41 390

12 673

763

17 289

19 346

7 930

216 287

(28)

Table 4 provides an overview of the annual financial results of FFHG from 2001 to 2012.

Table 4

Annual financial results of FFHG in 2001 to 2012

In 1 000 EUR

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Profit and loss statement

Revenues

10 077,61

14 908,11

22 574,22

29 564,18

36 859,08

43 479,85

41 296,34

45 383,60

42 036,70

43 281,58

43 658,38

40 983,45

Other revenues (including compensation for public policy remit)

7 771,31

5 514,63

3 686,87

3 039,35

3 618,93

6 097,29

5 436,58

4 858,16

11 540,36

14 554,55

9 313,99

21 390,92

Total Revenue

17 848,92

20 422,75

26 261,09

32 603,53

40 478,01

49 577,14

46 732,92

50 241,76

53 577,06

57 836,14

52 972,37

62 374,37

Costs of material

– 7 092,39

– 10 211,13

– 12 560,46

– 14 601,17

– 17 895,97

– 24 062,81

– 22 491,85

– 25 133,61

– 24 979,59

– 27 650,17

– 20 017,99

– 21 871,65

Costs of personnel

– 9 185,12

– 9 672,37

– 10 734,62

– 11 217,21

– 12 101,84

– 13 337,28

– 14 433,17

– 15 758,34

– 15 883,08

– 17 893,60

– 18 228,23

– 18 349,10

Other costs (including marketing)

– 5 692,81

– 11 434,31

– 10 521,27

– 11 454,36

– 14 058,15

– 12 885,28

– 9 897,46

– 9 630,21

– 7 796,81

– 8 029,40

– 6 760,92

– 6 643,00

EBITDA

– 4 121,41

– 10 895,06

– 7 555,27

– 4 669,21

– 3 577,94

– 708,22

– 89,56

– 280,39

– 4 917,58

– 4 262,96

– 7 965,23

– 15 510,62

EBITDA (excl other revenues)

– 11 892,72

– 16 409,69

– 11 242,13

– 7 708,56

– 7 196,87

– 6 805,51

– 5 526,13

– 5 138,56

– 6 622,78

– 10 291,59

– 1 348,76

– 5 880,30

Depreciation

– 5 325,63

– 5 674,68

– 6 045,39

– 7 699,33

– 7 973,46

– 10 527,90

– 10 191,89

– 11 855,19

– 12 482,28

– 11 827,19

– 13 297,31

– 12 733,48

Financial results (interest received — interest paid)

– 2 896,64

– 3 013,42

– 4 006,57

– 4 105,53

– 4 548,42

– 4 588,16

– 5 235,30

– 5 693,02

– 4 915,39

– 2 778,06

– 5 063,04

– 8 177,54

Extraordinary revenues and costs

– 431,54

– 206,00

– 10,46

0,00

0,00

0,00

0,00

0,00

0,00

– 272,55

0,00

0,00

Taxes

– 580,13

– 204,74

– 215,18

– 323,82

– 228,44

– 242,33

– 245,00

– 238,66

– 257,45

– 240,85

– 231,03

– 277,52

Coverage of losses by Fraport trough the profit and loss transfer

13 355,35

19 993,90

17 832,87

16 797,89

16 328,26

16 066,61

15 761,75

18 067,26

5 621,37

0,00

0,00

0,00

Annual result (profit/loss)

0,00

0,00

0,00

0,00

0,00

0,00

0,00

0,00

– 7 114,17

– 10 855,69

– 10 626,14

– 5 677,92

3.   DESCRIPTION OF THE MEASURES

3.1.   POSSIBLE STATE AID GRANTED TO FFHG

3.1.1.   MEASURE 1: 2001 PROFIT AND LOSS TRANSFER AGREEMENT

(29)

FFHG and Fraport concluded an agreement according to which Fraport was entitled to all profits generated by FFHG. In return, Fraport was obliged to assume all the losses of FFHG. Land Rhineland-Palatinate and Fraport concluded an agreement on 31 August 1999 in which Fraport committed to conclude a Profit and Loss Transfer Agreement (‘PLTA’). The corresponding notarial agreement was concluded on 24 November 2000 and the 2001 PLTA took effect on 1 January 2001 (‘2001 PLTA’) (15).

(30)

Fraport had the right to terminate the 2001 PLTA by giving six months' notice, but only from 31 December 2005. If not terminated, the agreement was tacitly prolonged at the end of each calendar year for another year, but no longer than until 31 December 2010.

(31)

The conclusion of the 2001 PLTA was approved by Fraport's supervisory board and shareholders (16). The duration of the 2001 PLTA was later extended until 2014 by an agreement of 5 April 2004 (‘PLTA 2004’). By the time the 2001 PLTA was replaced by the 2004 PLTA (‘2004 PLTA’, see recital 45), Fraport had assumed losses of EUR […] million.

3.1.2.   MEASURE 2: 2001 CAPITAL INCREASE

(32)

A report for the holding committee of Fraport (17) noted on 19 January 2001 that the losses accumulated by FFHG between 1998 and 2005 would presumably amount to EUR […] million, and therefore be more than twice as high as forecasted in 1997. In addition, two of FFHG's major freight clients shifted or reduced their business from Frankfurt Hahn airport at the same time, which resulted in a substantial decrease of freight traffic volume, namely by 45 % in the first semester of 2001.

(33)

Following that report, Fraport mandated a consultant, the Boston Consulting Group (‘BCG’), as well as its own Strategic Department Acquisitions and Holdings (‘SD’) in the beginning of 2001 to develop a strategy for FFHG. Both BCG and SD concluded that a positive long-term development of FFHG was only possible with a substantial improvement of the infrastructure, as a prerequisite to further increase traffic volume. SD also pointed out that such a substantial extension of FFHG would be financially risky, and that even in case of the most positive scenario, a positive annual result (net annual profit after tax) would presumably be reached at the earliest in 2013.

(34)

Based on the BCG study and its own analysis, SD drafted a development programme for FFHG, which envisaged investments of EUR 172 million until 2007. Those investments consisted of an ‘emergency’ programme, valued at EUR 27 million, covering the extension of the runway to 3 400 meters and the planning costs for the plan approval procedure (‘Planfeststellungsverfahren’) to extend the runway to 3 800 meters, as well as the additional costs of the commenced construction of the new passenger terminal.

(35)

However, in 2001 FFHG had an equity-to-debt ratio of only 4 % (18). In addition, as of 31 December 2005 Fraport had a right to terminate the 2001 PLTA. Under those conditions, FFHG could not finance the ‘emergency’ programme through further debt, but needed fresh capital.

(36)

The capital increase was decided by a resolution of Fraport's supervisory board on 14 December 2001 and subsequently by a resolution of FFHG's shareholders on 9 January 2002. Any increase of the authorised capital of a limited liability company, such as FFHG, requires the approval of all participating shareholders.

(37)

Following that approval, Fraport and Land Rhineland-Palatinate increased the authorised capital by EUR 27 million from EUR 3,5 million to EUR 30,5 million. On 9 January 2002 Fraport contributed EUR 19,7 million and Land Rhineland-Palatinate EUR 7,3 million. The capital increase was intended to finance the extension of the runway and investments into other infrastructure to increase the profitability of the airport.

3.1.3.   MEASURE 3: 2004 CAPITAL INCREASE

(38)

On 27 November 2002, it was agreed by Fraport, Land Rhineland-Palatinate, Land Hesse and FFHG that Land Hesse would become the third shareholder of FFHG and would as such contribute EUR […] million at the time when additional capital will be required to finance the investments. It was also agreed to create a close cooperation between Frankfurt Main airport and Frankfurt Hahn airport.

(39)

It was agreed that further investments were necessary to increase the profitability of Frankfurt Hahn airport. Those investments concern for example the extension of the runway to 3 800 meters. A draft shareholder agreement between Fraport, Land Rhineland-Palatinate, and Land Hesse was prepared on 22 March 2004. The final shareholder agreement regarding the decision to realise this 2004 capital increase was signed by Fraport, Land Rhineland-Palatinate, and Land Hesse on 30 March 2005 and registered in the commercial registry on 19 May 2005

(40)

The three parties agreed on a capital increase of EUR 19,5 million for FFHG's authorised capital, thereby continuing the investment programme proposed in 2001 by SD (see recitals 33-34). Land Rhineland-Palatinate and Land Hesse agreed to this capital increase subject to the condition that a new PLTA between FFHG and Fraport would be concluded, covering the period until 31 December 2014. The shareholders also agreed that any further debt FFHG was going to incur had to be secured by Fraport, Land Rhineland-Palatinate and Land Hesse at a ratio corresponding to the distribution of capital in FFHG. On that basis Fraport, Land Rhineland-Palatinate and Land Hessen committed to re-finance the infrastructure investments of FFHG.

(41)

Between 2004 and 2009, fresh capital of EUR 19,5 million was injected into FFHG in several instalments. Fraport's share in the capital increase amounted to EUR 10,21 million, Land Rhineland-Palatinate's to EUR 0,54 million, and Land Hesse contributed EUR 8,75 million.

(42)

In addition, both Land Hesse and Land Rhineland-Palatinate committed and injected according to the payment schedule (see Table 5 below) another EUR 11,25 million as capital reserve, to be paid by the former between 2007 and 2009, and by the latter between 2005 and 2009.

(43)

Therefore, the total amount of capital increase decided in 2005 was EUR 42 million.

(44)

The payments were due according to the following schedule in Table 5 (in thousand EUR):

Table 5

Payment schedule of capital injections

Fraport

 

2005

2006

2007

2008

2009

Total

Payments on capital contributions

2 554

1 915

1 915

1 915

1 915

10 214

Capital reserve

0

0

0

0

0

0

Total equity

 

 

 

 

 

10 214

Land Hesse

 

2005

2006

2007

2008

2009

Total

Payments on capital contributions

4 000

4 000

750

0

0

8 750

Capital reserve

0

0

3 250

4 000

4 000

11 250

Total equity

 

 

 

 

 

20 000

Land Rhineland-Palatinate

 

2005

2006

2007

2008

2009

Total

Payments on capital contributions

537

0

0

0

0

537

Capital reserve

1 821

2 357

2 357

2 357

2 357

11 249

Total equity

 

 

 

 

 

11 786

3.1.4.   MEASURE 4: 2004 PLTA

(45)

As it had been a condition for approval of the capital increase, FFHG and Fraport extended the duration of the 2001 PLTA until 2014 by an agreement of 5 April 2004. The new PLTA agreement became however only effective after the approval of Fraport's shareholder assembly. As agreed by the shareholders of FFHG with respect to the capital increase, it was laid down in this 2004 PLTA stated that any further debt accrued by FFHG had to be compensated by Fraport, Land Rhineland-Palatinate and Land Hesse at a ratio which corresponded to their equity.

(46)

Under the 2004 PLTA, Fraport took over approximately EUR […] million worth of losses until 2009. Therefore, under the two successive PLTA's together, a total of EUR […] million of losses, accrued between 2001 and 2009, were compensated by Fraport. Out of this sum, EUR […] million concern depreciation of assets and EUR […] million the interest payments on loans to finance infrastructure.

(47)

In 2009, Fraport sold its entire share in FFHG to Land Rhineland-Palatinate and thereby also terminated the PLTA.

3.1.5.   MEASURE 5: COMPENSATION OF FFHG FOR SECURITY CHECKS

(48)

Land Rhineland-Palatinate collects an airport security tax from all departing passengers at Frankfurt Hahn airport. The Land does not carry out the security checks itself, but has subcontracted that task to the airport, which in turn has subcontracted that task by agreement on to a security company. As consideration for carrying out the security checks, the Land transfers the entire revenue from the security tax to the airport.

3.1.6.   MEASURE 6: DIRECT GRANTS BY LAND RHINELAND-PALATINATE

(49)

According to the financial reports for Land Rhineland-Palatinate holding companies (19), the Land subsidised FFHG in the following amounts as summarised in Table 6.

Table 6

Direct grants by Land Rhineland-Palatinate

Year

Direct Grants (EUR)

1997

[…]

1998

[…]

1999

[…]

2000

[…]

Total 1997-2000

[…]

2001

[…]

2002

[…]

2003

[…]

2004

[…]

Total 2001-2004

[…]

(50)

The direct grants before 12 December 2000 by Land Rhineland-Palatinate to FFHG amount to […] million, whereas the direct grants by Land Rhineland-Palatinate to FFHG between 2001 and 2004 amount to EUR […] million.

3.2.   POSSIBLE STATE AID GRANTED BY FFHG TO RYANAIR AND ALL OTHER AIRLINES TRANSPORTING PASSENGERS

(51)

In 1999, FFHG attracted its first low-cost carrier, Ryanair. FFHG concluded three agreements with Ryanair in 1999, 2002 and 2005. Furthermore, FFHG introduced new airport charges in 2001 and 2006.

3.2.1.   MEASURE 7: 1999 RYANAIR AGREEMENT

(52)

The first agreement with Ryanair entered into force with retroactive effect as of 1 April 1999, and had a duration of 5 years (the ‘1999 Ryanair agreement’). Ryanair commenced operating from Frankfurt Hahn airport into London Stansted on 22 April 1999, when all essential conditions of the agreements had already been agreed upon.

(53)

A Deckungsbeitragsrechnung (break-even analysis) for the 1999 Ryanair agreement had been submitted by the management board of FFHG to the Supervisory Board in its meeting of 5 May 1999. According to Germany, FFHG's Supervisory Board did not vote on the 1999 Ryanair agreement or the break-even analysis, since the conclusion of the agreement was deemed to be operational day-to-day business being within the sole competence of FFHG's Management Board.

(54)

Table 7 summarises the charges to be paid by Ryanair under Annex 1 of the 1999 Ryanair agreement.

Table 7

Charges to be paid by Ryanair under Annex 1 of the 1999 Ryanair agreement

Charge/fee/tax type

EUR

Turnaround fee (per flight comprising landing charge, ramp handling and passenger clearance) (20)

[…]

Passenger fee (per arriving passenger)

[…]

Air security tax (per departing passenger)

[…]

De-icing fluid including hot water (per litre)

[…]

(55)

Under Annex 3 of the 1999 Ryanair agreement, FFHG additionally received a […] % commission on each ticket sold (cash or credit card) or issued by FFHG's ticket counters, a […] % commission on excess baggage charges collected by FFHG, EUR […] for each prepaid ticket processed by Ryanair and a […] % commission for each car rental booked through FFHG.

(56)

Ryanair was entitled to marketing support amounting to an annual maximum of EUR […], which was to be paid by FFHG in quarterly instalments and only for the first 3 years of operation. The marketing support had to be used exclusively for advertisements concerning routes departing from Frankfurt Hahn airport. Ryanair had to provide supporting invoices and detailed proof of how the money was spent.

3.2.2.   MEASURE 8: 2001 SCHEDULE OF AIRPORT CHARGES

(57)

On 16 October 2001, Frankfurt Hahn airport's 2001 schedule of airport charges was approved and published by the Land Rhineland-Palatinate's Transport Department. It entered retroactively into force on 1 October 2001 (21).

(58)

As Frankfurt Hahn airport's business strategy was focused on low cost carriers, which typically operate Boeing 737 or Airbus A 319/320 aircraft with a maximum take-off weight (‘MTOW’) of approximately 50 to 80 tonnes, it introduced a zero landing and take-off charge for aircraft between 5,7 and 90 tonnes MTOW.

(59)

Table 8 summarises the charges per aircraft for central ground handling infrastructure services to be paid by airlines under the 2001 schedule of airport charges.

Table 8

Charges for central ground handling infrastructure services to be paid by airlines under the 2001 schedule of airport charges

 

Charge per aircraft in EUR

MTOW up to 90 tonnes

included in the take-off and landing charge

MTOW of more than 90 tonnes

50,00

(60)

The passenger charge was set at EUR 4,35 per arriving passenger. The passenger security fee based on the number of passengers aboard the aircraft when departing is EUR 4,35 per passenger, payable to Land Rhineland-Palatinate's Highways and Transport Department — Air Transport Section.

(61)

For each approach of an aircraft under Instrument Flight Rules, an Air Traffic Control approach charge has to be paid to the airport operator. That charge for commercial or non-commercial flights is included in the landing and take-off charge if the flight is operated for purposes other than training and instruction. It hence is zero for aircraft to which the zero landing and take-off charge applies.

3.2.3.   MEASURE 9: 2002 RYANAIR AGREEMENT

(62)

The second agreement with Ryanair is dated 14 February 2002 (the ‘2002 Ryanair agreement’) and was submitted to FFHG's Supervisory Board held on 16 November 2001. The minutes of that meeting report that the majority of the members of the Supervisory Board approved it.

(63)

The copy of the 2002 Ryanair agreement that was transmitted to the Commission is not signed. According to Germany, although that agreement was never signed, it has nevertheless been applied by the parties since 14 February 2002.

(64)

According to Germany, the 2002 Ryanair agreement replaced the 1999 Ryanair agreement, and it was concluded for a period of […] years (until […]). The passenger fee however remained identical as in the initial agreement of 1999. Ryanair has the option to prolong the agreement on similar terms and conditions until […].

(65)

The 2002 Ryanair agreement is based upon the Standard Ground Handling Agreement of the International Air Transport Association, which has been adapted to the needs of the parties. It consists of the following elements:

(i)

The Main Agreement

(ii)

Annex A — Description of Ground Handling Services;

(iii)

Annex B — 1.0 Location, agreed services and charges for Frankfurt Hahn airport;

(iv)

Second Annex B — 1.0 Location, agreed services and charges for Frankfurt Hahn airport;

(v)

Annex 3 and Appendixes 1-3 (22) to the second Annex B — 1.0;

(vi)

Annex C — Airport charges;

(vii)

Annex D — Description of the ground handling service package ‘Hahn-Smart’

(viii)

Third Annex B — Location, agreed services and charges for Frankfurt Hahn airport — ‘Hub Agreement’

(ix)

Annex E — Marketing Agreement

(66)

The Main agreement, Annex A and Annex B — 1.0 are simply copies of the standard form. The parties have not filled in any of the fields, as this part of the standard form was not considered applicable.

(67)

The second Annex B — 1.0 has been filled in by the parties, in so far as names of the parties, bank accounts and the price for de-icing fluid (EUR […] per litre) and hot water (EUR […] per litre) are concerned.

(68)

Annex 3 and its Annexes 1-3 concern ‘further strategic agreements’ between the parties. They relate to the technical arrangements for ground handling, ticketing and branding space at the airport.

(69)

Annex D stipulates that for ground-handling the charges summarised in Table 9 apply, under the condition of a turnaround-time not exceeding 30 minutes.

Table 9

Charges for ground-handling if maximal 30 minutes turnaround

Aircraft with a MTOW

Unit

EUR

Up to 5,7 tonnes

Handling

[…]

Up to 14 tonnes

Handling

[…]

Up to 20 tonnes

Handling

[…]

Up to 90 tonnes

Handling

[…]

More than 90 tonnes

Handling

[…]

(70)

The blank fields for aircraft of ‘up to’ and ‘more than’ […] tonnes appear to indicate that […] charged for aircrafts between […] and […] tonnes (23).

(71)

Annex E (i.e. Hahn Smart Agreement) confirms that analysis. It stipulates in point 1:

‘[…]’

(72)

The airport fee level was frozen until 30 April 2004 and thereafter was to be adjusted corresponding to the German Consumer Price Index, if the latter increased by more than […] % compared to the previous year.

(73)

Annex E also foresees the payment of marketing support. Ryanair is entitled to the following marketing support:

(i)

one-off payments of EUR […] for each new route departing from Frankfurt Hahn airport and established after 13 February 2002, and

(ii)

rebates on the airport charges dependent on the number of aircrafts based at Frankfurt Hahn airport and on the number of landing passengers as summarised in Table 10.

Table 10

Rebates on airport charges

Number of aircraft based at Frankfurt Hahn airport

Marketing support per passenger (EUR)

Up to 2

[…]

3 to 4

[…]

5-8

[…] (24)

(74)

Annex E also provides that VAT will be added to every payment or price in the agreement, in so far as turnover tax law is applicable.

(75)

[…].

(76)

In conclusion, according to the 2002 Ryanair agreement the airline pays the charges summarised in Table 11.

Table 11

Overview of airport charges to be paid by Ryanair

Charge/fee/tax type

EUR

Passenger fee (per arriving passenger)

[…]

Air security tax (per departing passenger)

[…]

De-icing fluid (per litre)

[…]

Hot water (per litre)

[…]

Revenue for prepaid tickets processed by Ryanair

[…]

3.2.4.   MEASURE 10: 2005 RYANAIR AGREEMENT

(77)

On 4 November 2005, an amendment to the agreement of 2002 was agreed, the ‘Agreement Ryanair/Flughafen Frankfurt-Hahn GmbH Delivery of aircraft 6 to 18 — year 2005 to year 2012’ (the ‘2005 Ryanair agreement’). On 18 November 2005, the conclusion of the 2005 Ryanair agreement was approved by the supervisory board of FFHG.

(78)

The relevant parts of the 2005 Ryanair agreement are:

(i)

[…];

(ii)

[…];

(iii)

[…];

(iv)

[…].

(79)

The 2005 Ryanair agreement is valid until […]. The other elements of the 2002 Ryanair agreement, in particular the Main Agreement and Annex E (i.e. Hahn Smart-Agreement), were also prolonged until […].

(80)

Table 12 shows the number of Ryanair aircraft to be based at Frankfurt Hahn airport and the envisaged passenger volume under the 2005 Ryanair agreement:

Table 12

Ryanair aircrafts and passenger growth foreseen under the 2005 Ryanair agreement

Year

2006

2007

2008

2009

2010

2011

2012

No of aircraft

[…]

[…]

[…]

[…]

[…]

[…]

[…]

Passengers (Mio)

[…]

[…]

[…]

[…]

[…]

[…]

[…]

(81)

Table 13 provides an overview of the rebate system on airport charges introduced by the 2005 Ryanair agreement.

Table 13

Amended airport rebates introduced by the 2005 Ryanair agreement

In EUR

 

Total average rebate per passenger

Average passenger fee

Rebate on all inbound passengers

[…]

[…]

[…]

Additional rebate on all departing passengers above […] Mio and up to […] Mio per year

[…]

[…]

[…]

Additional rebate on all departing passengers above […] Mio per year

[…]

[…]

[…]

(82)

[…].

3.2.5.   MEASURE 11: 2006 SCHEDULE OF AIRPORT CHARGES

(83)

The 2006 schedule of airport charges was approved for Frankfurt Hahn airport by the Land Rhineland-Palatinate's Transport Department on 26 April 2006 (25) and entered into force on 1 June 2006. It follows the same basic principles as the 2001 schedule of airport charges (see above recital 57 and following).

(84)

The changes compared to the previous schedule concern the take-off and landing charges, the passenger fee and the marketing support. The 2006 schedule of airport charges maintains the two fundamental principles of the 2001 schedule of airport charges:

(i)

Air traffic control charges and ground handling charges are included in the take-off and landing charges;

(ii)

Aircraft with a MTOW of more than 5,7 tonnes do not have to pay take-off and landing charges (or air traffic control charges or ground handling charges) at all.

(85)

The 2006 schedule introduces, however, two limitations to those principles. First of all, only passenger aircraft can claim those advantages. Secondly, the advantages are limited to aircraft with a turn-around time of less than 30 minutes.

(86)

Furthermore, the passenger charges are set per departing passenger, and as a function of the total number of passengers transported by the airline (departing and arriving) to which the airplane belongs. Table 14 provides an overview of the passenger charges to be paid under the 2006 schedule of airport charges depending on the total number of departing and arriving passengers.

Table 14

Passenger charges under the 2006 schedule of airport charges

Total number of departing and arriving passengers

Passenger charge per departing passenger in EUR

Minimum amount of overall airport charges to be paid in EUR

Less than 100 000

5,35

 

100 001 -250 000

4,40

267 500,00

250 001 -500 000

3,85

550 000,00

500 001 -750 000

3,45

962 500,00

750 001 -1 000 000

3,15

1 293 750,00

1 000 001 -1 500 000

2,90

1 575 000,00

1 500 001 -2 000 000

2,68

2 175 000,00

2 000 001 -3 000 000

2,48

2 680 000,00

3 000 001 -5 400 000

2,48 per passenger 1 to 3 000 000

2,24 per passenger 3 000 001 to 5 400 000

Not applicable.

5 400 001 -10 000 000

2,48 per passenger 1 to 3 000 000

2,24 per passenger 3 000 001 to 5 400 000

2,21 per passenger 5 400 001 to 10 000 000

Not applicable.

More than 10 000 000

2,48 per passenger 1 to 3 000 000

2,24 per passenger 3 000 001 to 5 400 000

2,21 per passenger 5 400 001 to 10 000 000

2,19 per passenger

Not applicable

(87)

Table 15 shows the amount of marketing support that can be granted to airlines using the airport.

Table 15

Marketing support

Total number of departing passengers

Minimum number of destinations and frequency from Frankfurt Hahn airport

Marketing support in EUR

5 000 -100 000

[…]

[…]

100 001 -250 000

[…]

[…]

250 001 -500 000

[…]

[…]

500 001 -750 000

[…]

[…]

750 001 -1 000 000

[…]

[…]

(88)

Moreover, marketing support is regulated in a separate document available on the web site of Frankfurt Hahn airport. One-time marketing support is granted under the following conditions:

(i)

eligible are flights to destinations which have not been served from Frankfurt Hahn airport in the last 24 months;

(ii)

the maximum support is 33,3 % of the proven marketing costs for a new destination;

(iii)

the airline has to demonstrate the medium-term profitability of the new destination through appropriate supporting documents;

(iv)

FFHG can request the reimbursement of the marketing support in the event that the airline does not fulfil its obligations with respect to the new destination.

3.3.   MEASURES OUTSIDE THE SCOPE OF THE 2008 OPENING DECISION (MEASURE 12)

(89)

Germany committed to inject into FFHG's equity EUR […] million to refinance FFHG's loans.

(90)

Those funds refinance infrastructure measures irrevocably decided by the public authorities prior to 31 December 2012, but which were not covered through the PLTAs, capital increases or other grants.

4.   GROUNDS FOR OPENING THE PROCEDURE AND INITIAL ASSESSMENT

4.1.   POSSIBLE STATE AID GRANTED TO FFHG

4.1.1.   MEASURE 1: 2001 PLTA

(91)

With regard to the 2001 PLTA, the Commission found in the 2008 opening decision that the annual losses were assumed by Fraport, a company which is predominantly publicly owned. The Commission therefore established that it needed to examine whether Germany could be regarded as having been involved in the conclusion of the 2001 PLTA.

(92)

The Court of Justice held in Stardust Marine  (26) that the resources of an undertaking incorporated under private law, whose shares are in majority publicly owned, constitute State resources. The Commission considered that the conclusion of the agreement was also to be considered as imputable to the State as it would have been impossible to do so without taking into account the requirements of the public authorities.

(93)

Furthermore, in contrast to the arguments raised by Germany, the Commission expressed doubts that a market economy investor would have concluded such an agreement as the agreement clearly seemed to constitute an advantage for FFHG in relieving it from a financial burden which otherwise it would have had to shoulder.

(94)

The Commission also considered that the measure was selective as only FFHG's losses were covered and that the measure concerned distorted or threatened to distort competition within the market of airport operators and affected trade between Member States.

(95)

The Commission thus took the preliminary view that the measure at issue might constitute State aid in the form of operating aid.

(96)

Since Germany did not provide any evidence or argue that such operating aid could be considered compatible with the internal market pursuant to Article 107(3)(c) of the Treaty, and in the light of the 2005 Aviation Guidelines, the Commission raised serious doubts that that aid could be deemed compatible.

4.1.2.   MEASURE 2: 2001 CAPITAL INCREASE

(97)

In the 2008 opening decision, the Commission found that Fraport and Land Rhineland-Palatinate had increased FFHG's capital by EUR 27 million, contributing EUR 19,7 million and EUR 7,3 million respectively. Concerning the existence of aid, the Commission pointed out that Fraport's as well as Land Rhineland-Palatinate's resources constitute State resources, according to the criteria established in the case Stardust Marine  (27). Furthermore, the Commission took the preliminary view that Fraport's decisions are also likely to be imputable to the State.

(98)

Moreover, the Commission indicated that it was not convinced that the market economy operator test (MEOT) for the capital increase was fulfilled. The Commission has accepted in principle that an assessment carried out by one or more independent audit companies can serve as proof that a transaction has taken place at market value (28). However, the Commission had doubts whether the report handed in by PwC on account of Fraport sufficed to exclude the presence of an advantage.

(99)

The doubts were due to the content of the MEOT carried out by PwC as it was purely qualitative and did not assess the cost of disengagement by Fraport. The report also did not quantify or explain in detail the ‘high risks’ identified by BCG and Fraport's SD, and generally limited the assessment to Fraport, without considering whether Land Rhineland-Palatinate acted like a market economy investor. For those reasons, the Commission could not exclude that the capital increase provided an advantage to FFHG.

(100)

The Commission also concluded that the measure was selective as only FFHG was granted the 2001 capital increase and that it distorted or threatened to distort competition within the market of airport operators and affected trade between Member States.

(101)

The Commission therefore took the preliminary view that the measure at issue might constitute State aid in the form of investment aid and raised doubts as to its compatibility with the internal market, notably in view of Article 107(3)(c) of the Treaty and the 2005 Aviation Guidelines.

4.1.3.   MEASURE 3: 2004 CAPITAL INCREASE

(102)

With regard to the second capital increase, the Commission noted that in 2004, FFHG's existing shareholders increased its authorised capital by EUR 10,75 million, Fraport contributing a share of EUR 10,21 million and Land Rhineland-Palatinate a share of EUR 0,54 million. In addition, Land Hesse entered as new shareholder, contributing another EUR 8,75 million. Furthermore, both Land Rhineland-Palatinate and Land Hesse committed to contribute each EUR 11,25 million as capital reserve.

(103)

The Commission adopted mutatis mutandis the same reasoning for this capital increase as for the one in 2001 (see Section 4.1.2) for the existence of aid and raised the same doubts as to its compatibility with the internal market.

4.1.4.   MEASURE 4: 2004 PLTA

(104)

According to the 2008 opening decision, Fraport took over losses of FFHG amounting to at least EUR […] million under the 2004 PLTA. The Commission applied mutatis mutandis the same reasoning as the one advanced in relation to the 2001 PLTA, see recital 91 and following. In relation to the MEOT submitted by PwC, the Commission doubted its reliability given that the assessment was largely qualitative. Hence, the Commission considered that the 2004 PLTA constitutes operating aid and expressed doubts as regards its compatibility with the internal market, in particular in light of the 2005 Aviation Guidelines.

4.1.5.   MEASURE 5: COMPENSATION OF FFHG FOR SECURITY CHECKS

(105)

The Commission indicated in the 2008 opening decision that airport security services are not of an economic nature and do not fall within the scope of the rules on State aid (29).

(106)

The Commission then observed that the economic analysis of PwC seemed to indicate that Land Rhineland-Palatinate over-compensated FFHG for carrying out security checks. In that regard the Commission pointed out that that advantage was financed through State resources and had the potential to distort competition and affect trade between Member States. Hence, the Commission considered that the overcompensation constituted State aid within the meaning of Article 107(1) of the Treaty.

(107)

With regard to the compatibility assessment of that operating aid, the Commission applied mutatis mutandis the same reasoning as the one advanced in relation to the 2001 PLTA, see recital 95 and following. Another possible legal basis assessed for compatibility with the internal market was Article 106(2) of the Treaty. However, Germany did not provide any indication that a public service obligation had been imposed on FFHG. Therefore, the Commission did not find a legal basis to declare the overcompensation arising from the security charge compatible with the internal market.

4.1.6.   MEASURE 6: DIRECT GRANTS BY LAND RHINELAND-PALATINATE

(108)

The Commission noted in its 2008 opening decision that the direct grants granted in the years 2001 to 2004 appear to have been granted without consideration, from State resources (namely the general budget of Land Rhineland-Palatinate) and in a selective manner (only to FFHG). The Commission considered that those grants have the potential to distort competition and affect trade between Member States. Hence, the Commission took the preliminary view that they constituted State aid within the meaning of Article 107(1) of the Treaty in the form of investment aid.

(109)

The Commission also raised doubts as to the compatibility of the aid with the internal market, notably in view of Article 107(3)(c) of the Treaty and the 2005 Aviation Guidelines.

4.2.   POSSIBLE STATE AID GRANTED BY FFHG TO RYANAIR AND ALL OTHER AIRLINES TRANSPORTING PASSENGERS

4.2.1.   MEASURE 7: 1999 RYANAIR AGREEMENT

(110)

Concerning the 1999 Ryanair agreement, the Commission generally pointed out in the 2008 opening decision that a reduction or system of reductions granting preferential treatment to a specific business was likely to fall within the scope of Article 107 of the Treaty.

(111)

The Commission considered that, as FFHG is a predominantly publicly owned undertaking, its resources constitute State resources. The Commission pointed out in relation to the 1999 Ryanair agreement that although the supervisory board did not vote on that agreement, neither did it pass any motion or take any action suggesting that it was opposed to it. Therefore, the Commission noted that it had no indications allowing it to conclude that the 1999 Ryanair agreement was not imputable to the State.

(112)

Furthermore, the Commission raised doubts as to whether a private market investor would have concluded the 1999 Ryanair agreement. The Commission noted in this respect that the charges imposed by FFHG on Ryanair did not cover FFHG's full costs and therefore appeared to confer an advantage to Ryanair.

(113)

The Commission also pointed out that the costs of the new terminal of approximately EUR […] million had not been taken into account in the MEOT submitted by Germany. As a preliminary observation, the Commission rejected Germany's argument that in 1999 HHN was anyway in need of a new passenger terminal, and that the capacity of 1,25 million passengers per year was far above the expected passenger volume to be generated by Ryanair, since Ryanair was the only major passenger air carrier at Frankfurt Hahn airport in 1999. For those reasons, the Commission raised doubts as to the MEOT handed in by Germany.

(114)

The Commission also considered that the 1999 Ryanair agreement is a selective and specific measure as only Ryanair received such conditions in the negotiations with FFHG, and that the measure concerned distorts or threatens to distort competition within the market of airlines and affects trade between the Member States.

(115)

Therefore, the Commission took the preliminary view that, since it appeared that it did not fulfil the MEOT and was imputable to the State, the 1999 Ryanair agreement would constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did see not legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

4.2.2.   MEASURE 8: 2001 SCHEDULE OF AIRPORT CHARGES

(116)

In the 2008 opening decision, the Commission also analysed whether the 2001 schedule of airport charges possibly constituted State aid to Ryanair. It considered in that respect that, as companies in which the public authorities have a predominant share, FFHG's and Fraport's resources constitute State resources and that their conduct would also be imputable to the State.

(117)

The Commission expressed doubts as to whether the fee structure of the 2001 schedule of airport charges was set in a manner which would allow the airport to run profitably as Germany had not provided a MEOT for this schedule. As Ryanair seemed to have been the only passenger airline using the airport between 2001 and 2003, and retained more than 95 % of the passenger volume until 2006, the results of the MEOT for the 2002 Ryanair agreement, which was based on the 2001 schedule of airport charges and introduced an additional marketing support, served as a benchmark. Based on the information provided, the Commission doubted whether the MEOT for the 2001 schedule of airport charges was fulfilled.

(118)

The Commission considered that the measure was selective as only airlines that use Frankfurt Hahn airport benefited from the 2001 schedule of airport charges and that it distorted or threatened to distort competition and affected trade between the Member States.

(119)

Therefore, concerning the 2001 schedule of airport charges, the Commission took the preliminary view that it might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not find legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

4.2.3.   MEASURE 9: 2002 RYANAIR AGREEMENT

(120)

Regarding the question of State resources, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, discussed in Section 4.2.1 (recital 110 and following). Concerning imputability of the measure, the 2002 Ryanair agreement was formally approved by the Supervisory Board of FFHG, which is dominated by members nominated by the public authorities. Hence, the Commission took the preliminary view that the 2002 Ryanair agreement was imputable to Germany.

(121)

Furthermore, the Commission expressed doubts as to whether a market economy investor would have concluded the 2002 Ryanair agreement. In this respect, the Commission doubted the calculation presented by Germany. Furthermore, the Commission raised doubts regarding the calculation of costs since the costs for general airport infrastructure and general airport administration handed in by Germany were based on marginal, rather than average costs. Also, the level of airport charges was frozen until 30 April 2004, and thereafter was to be adjusted corresponding to the German Consumer Price Index only if this index increased by more than […] % compared to the previous year.

(122)

Concerning selectivity, distortion of competition and effect on trade, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, see Section 4.2.1 (recital 110 and following).

(123)

The Commission therefore took the preliminary view that the 2002 Ryanair agreement might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not see any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

4.2.4.   MEASURE 10: 2005 RYANAIR AGREEMENT

(124)

Regarding the question of State resources, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement discussed in Section 4.2.1 (recital 110 and following). On the question of whether there was an economic advantage, the Commission expressed doubts with regard to the MEOT presented by Germany since there was insufficient information for verifying the calculations and because the investments induced by increasing passenger numbers were not in any way taken into account or allocated to Ryanair.

(125)

The Commission furthermore indicated that although the 2005 Ryanair agreement, differed from the 1999 and 2002 Ryanair agreements, by introducing a kind of contractual penalty system if Ryanair did not generate the contractually determined passenger volume, it doubted whether those sanctions were effective.

(126)

Concerning selectivity, distortion of competition and effects on trade, the Commission applied the same reasoning mutatis mutandis as for the 1999 Ryanair agreement, see Section 4.2.1 (recital 110 and following).

(127)

The Commission concluded that the 2005 Ryanair agreement would also constitute State aid within the meaning of Article 107(1) of the Treaty. The Commission did not find any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

4.2.5.   MEASURE 11: 2006 SCHEDULE OF AIRPORT CHARGES

(128)

With regard to the 2006 schedule of airport charges, Germany had only partially provided an economic justification in the form of a MEOT to the Commission. The Commission indicated in its 2008 opening decision that with the incomplete information it was unable to verify whether, as Germany argued, economies of scale justified the differentiation in passenger charges. Furthermore, the economic justifications given for the 2006 schedule of airport charges left several questions open, such as which costs are included in the cost coverage and why the marketing support was not included in the economic justification of the schedule.

(129)

The Commission considered that the measure was selective as only airlines using Frankfurt Hahn airport benefited from the 2006 schedule of airport charges and that the measure concerned distorted or threatened to distort competition and affected trade between the Member States.

(130)

Therefore, concerning the 2006 schedule of airport charges, the Commission took the preliminary view that it might constitute State aid within the meaning of Article 107(1) of the Treaty. Furthermore, the Commission did not see any legal grounds for declaring such a permanent operating aid for an airline compatible with the internal market.

5.   COMMENTS FROM GERMANY

(131)

Germany submitted extensive observations and economic analysis in the course of this procedure.

5.1.   GENERAL REMARKS

(132)

In its comments, Germany first of all provided some general background considerations concerning Frankfurt Hahn airport. Germany insisted that the Frankfurt Hahn airport project was meant to become a profitable private company from the moment of its conversion. Therefore, Fraport strategically got involved with a view to the airport's long-term profitability. With its low-cost carrier business model, considerably simplified infrastructure and low capital costs, Frankfurt Hahn airport has been a pioneer in Europe, according to Germany. However, Germany argued that the necessary time framework for reaching positive operative results in that kind of infrastructure project would be approximately 20 years. Germany pointed out that Frankfurt Hahn airport has had a positive result in EBITDA for the first time in 2006, so already 8 years after its market entry, which would prove its economic viability. According to Germany, Frankfurt Hahn airport was the fastest growing airport in Germany.

(133)

Furthermore, Germany is of the opinion that the measures concerning Frankfurt Hahn airport were taken exclusively according to the market economy investor principle. According to Germany, if a private undertaking of the same size and in a comparable situation would also have undertaken the financing based on a commercial logic, this would exclude any advantage. Germany argued that the Commission should only assess whether the respective measure is commercially defendable and not whether it will without reasonable doubt be successful. Also, Germany referred to the principle of equality of public and private undertakings under which funds that the State is offering to an undertaking in accordance with market conditions will not be considered State aid. All in all, according to Germany, the measures for Frankfurt Hahn airport had all been granted in line with market conditions; the MEOTs which Germany presented would prove this. Germany then elaborated on those general remarks with regard to the respective measures assessed in the 2008 opening decision.

5.2.   ALLEGED STATE AID GRANTED TO FFHG

5.2.1.   MEASURE 1: 2001 PLTA

(134)

Germany argued that the State aid rules are not applicable to the 2001 PLTA since it was concluded in August 1999, i.e. before the judgment by the Court of Justice in the case Aéroports de Paris  (30) on 24 October 2002. According to Germany, the judgment at first instance by the General Court became definitive only after the judgment of the Court of Justice was delivered and only when it was clarified that airports were considered as undertakings and therefore fell within the scope of application of the State aid rules. That approach would have been confirmed later on in the Leipzig-Halle judgment (31).

(135)

Germany stated furthermore that no State resources had been employed. In that regard, Germany elaborated that the losses taken over by Fraport did not burden the budget of the State. Furthermore, Germany argued that the decisions taken by Fraport were not imputable to Germany since the public shareholders were not able to exercise a determining influence. In this regard, Germany emphasised that it would have to be verified in each individual case whether resources of a company were actually controlled by the State. According to Germany, the fact that a majority of shareholders was public is not sufficient to assume that the 2001 PLTA involves State resources.

(136)

According to Germany, the shareholders cannot determine the behaviour of the management board in the case of a German stock company, an Aktiengesellschaft, such as Fraport. In Germany's view, Fraport is an independent incorporated company listed at the stock exchange and the public regional bodies do not exercise continuing control over its funds. Germany explained that according to Section 76 of the Aktiengesetz (the German stock corporation act, ‘AktG’), the management board has a far-reaching decision-making powers independently of the shareholders. Germany argued that in the cases Stadtwerke Brixen AG  (32) and Carbotermo  (33) cases, the Court of Justice already recognised the nature of the German listed company and the considerable independence enjoyed by their management board vis-a-vis its shareholders. In that respect, the public authorities could not control Fraport's day-to-day business.

(137)

In that regard, Germany explained that Fraport was not in any way incorporated into the structures of public administration, that Fraport was not accountable to Germany for its actions and was in no way subordinated to the public administration. Even though Germany recognised that the public shareholders were involved in the decision-making at the general meeting of shareholders during which the 2001 PLTA was decided, Germany argued that this did not mean that the public shareholders had done anything more than exercise their lawful rights and obligations as shareholders.

(138)

In addition, Germany stated that the 2001 PLTA did not confer any advantage on FFHG. It referred to the MEOT undertaken by PwC in that regard, which considered that any market economy investor would also have concluded that agreement. Furthermore, Germany stated that the risks and benefits of the 2001 PLTA were evenly distributed and that it also made sense from a tax law point of view. Overall, Germany depicted the 2001 PLTA as a perfectly normal measure in a corporate group to apply global or sectorial structural policy.

5.2.2.   MEASURE 2: 2001 CAPITAL INCREASE

(139)

Germany explained that the 2001 capital increase was necessary since an external financing of the investments into its infrastructure would have strained the annual results of FFHG too much in the short-term.

(140)

Germany stated that the 2001 capital increase was decided by the supervisory board of FFHG on 14 December 2001 and led to a change in the articles of association of FFHG on 9 January 2002. Therefore, Germany disputed that the rules of State aid are applicable to that measure and referred here also to its reasoning concerning the 2001 PLTA (see recital 134).

(141)

Germany furthermore argued that the funds invested by Fraport (EUR 19,7 million out of EUR 27 million) were not State resources since the State had no control over Fraport. In that respect Germany referred to its argumentation on State resources concerning the 2001 PLTA (see recital 136). In addition, Germany stated that the capital increase could also not be imputable to Germany and referred to its explanations on imputability concerning the 2001 PLTA (see recital 134). Germany added that the approval by FFHG's shareholders of the 2001 capital increase could not be a determining factor for its imputability to the State. In Germany's opinion, the actions of the undertaking who handed out the possible aid must be imputable, not those of the undertaking benefitting from the aid. Since FFHG was the undertaking benefitting from the aid, its approval of the capital increase would not make the granting of aid imputable to Germany. According to Germany, nor could the approval of Fraport's supervisory board be taken as an indication for imputability since at that time the supervisory board was already constituted on par of representatives of the employees and the shareholders with a right of codetermination, meaning that there were 10 representatives of the employees and 10 representatives of the shareholders.

(142)

Germany also argued that no advantage was conferred on FFHG by the 2001 capital increase. Fraport as well as the Land Rhineland-Palatinate had acted like any market economy investor would have in this matter.

(143)

Germany disagreed with the doubts raised by the Commission in relation to the MEOT regarding Fraport's 2001 capital increase decision. Germany submitted all additionally demanded internal documents to the Commission. According to Germany, the decision taken by Fraport in 2001 for a capital increase was based furthermore on an assessment of the measure by the BCG and two general studies ordered by Fraport on the development of air traffic. Germany emphasised that Fraport had increased the capital since the assessment of BCG stated that reaching profitability would not be possible at Frankfurt Hahn airport without further construction and infrastructure measures. The MEOT had taken into account all those documents.

(144)

Following the doubts raised by the Commission in relation to the MEOT carried out by PwC, Germany submitted a second, supplementary assessment from PwC to complement and refine the first MEOT. That refined assessment comes to the same conclusion as the first one, namely that the MEOT is fulfilled. Germany rejected Commission's doubts that PwC had not assessed a disengagement of Fraport and that therefore, without knowing the cost of disengagement, it would be impossible to verify whether Fraport had acted like a market economy investor. Germany argued that the cost of disengagement did not make a difference in the assessment. Moreover, Germany pointed out that Fraport had considered disengagement, but that it would not have been possible during the next 5 years due to the 2001 PLTA. Furthermore, the PwC's assessment showed that the investment would have positive results for Fraport in the long run.

(145)

Following the 2008 opening decision Germany also submitted a MEOT also in relation to the behaviour of Land Rhineland-Palatinate and its decision to contribute to the capital increase of FFHG with EUR 7,3 million. According to the assessment, also carried out by PwC, Land Rhineland-Palatinate had acted like a market economy operator since the investment measures decided in 2001 were necessary and therefore the capital increase was commercially defendable.

5.2.3.   MEASURE 3: 2004 CAPITAL INCREASE

(146)

Germany argued that also after the Aéroports de Paris judgment the State aid rules would not be applicable to the 2004 capital increase. According to Germany, the 1994 Aviation Guidelines were in force at that moment and under those Guidelines infrastructure measures at airports were not relevant to the application of State aid rules.

(147)

Germany argued that, in contrast to the Commission's description in the 2008 opening decision, the 2004 capital increase was agreed on 30 March 2005 and has been registered with the commercial registry on 19 May 2005. Furthermore, the basic agreement on this capital increase goes back to an agreement in the year 2002. Germany explained that this agreement foresaw the establishment of an airport system between Frankfurt-Main airport and Frankfurt Hahn airport under Council Regulation (EEC) No 2408/92 (34). According to Germany, the assessment of the 2004 capital increase would have to be assessed against this background.

(148)

Germany pointed out that according to the MEOT submitted by PwC, supported by supplementary assessments after the 2008 opening decision, Fraport, Land Rhineland-Palatinate and Land Hesse have all acted like market economy investors concerning the 2004 capital increase. Concerning the argumentation for Fraport, Germany referred to its arguments made in relation to the 2001 capital increase (see recital 140 and following). In the first as well as in the supplementary MEOT PwC concluded, according to Germany, that the 2004 capital increase, as well as the conclusion of a new PLTA were to be seen as advantageous for Fraport at the time, qualitatively as well as quantitatively. This was according to Germany justified by the finding of PwC that Fraport's Return on invested capital (hereinafter: ‘ROIC’) when investing into FFHG was above an alternative return of an equivalent capital investment.

(149)

In respect to Land Rhineland-Palatinate, Germany pointed to PwC's conclusion that also the Land acted like a market economy investor since the ROIC for the Land was, similarly as for Fraport, above a comparable alternative investment.

(150)

In relation to the behaviour of Land Hesse, Germany argued that the restricted growth possibilities for Frankfurt Main airport deriving, inter alia, from the night flight curfew made further development of Frankfurt Hahn airport necessary in the eyes of Land Hesse. Otherwise Frankfurt Main airport would have faced severe economic consequences. Germany pointed out that this development was necessary in order to comprehensively exploit the existing growth opportunities in the framework of the 24 hours-flight permission for Frankfurt Hahn airport together with the envisaged introduction of the airport system Frankfurt Main airport — Frankfurt Hahn airport. Hence, the involvement of Land Hesse in the capital increase was unavoidable, according to Germany.

5.2.4.   MEASURE 4: 2004 PLTA

(151)

Germany stated that the 2004 PLTA could only be seen in the light of the capital increase and the changes in the shareholder structure in 2004, especially since Land Rhineland-Palatinate and Land Hesse made the redistribution of FFHG shares subject to the conclusion of the 2004 PLTA between Fraport and FFHG until 2014.

(152)

Germany referred to its arguments made in relation to the 2004 capital increase and argued that the State aid rules were also not applicable to the 2004 PLTA (see recital 146 and the following).

(153)

Concerning the involvement of State resources, Germany referred to its explanations for the 2001 PLTA (see recital 134 and the following). Hence, in Germany's opinion the resources of Fraport were not State resources since Fraport was not subject to State control.

(154)

Germany also argued that for the decision of the 2004 PLTA to be approved, a majority of 75 % was needed, whereas the public shareholders only held approximately 70 % of the shares and were therefore in fact not able to control the decisions of Fraport. Moreover, the remaining 30 % of Fraport's shares were dispersed shareholdings. The vote was taken with 99,992 % positive votes, so also the market economy investors did vote for the 2004 PLTA.

(155)

As regards the existence of an economic advantage, Germany referred again to the explanations for the 2001 PLTA (see recital 137), according to which a distribution of profits and losses is an absolutely normal measure within a group of companies. Furthermore, according to PwC, any market economy investor would have taken the same decision of concluding the 2004 PLTA since at that moment a profit was to be expected from the year 2008/2009 onwards. Germany submitted further that on the basis of the doubts expressed by the Commission, PwC tested those measures again in the supplementary assessment according to qualitative calculations and came to the same conclusion.

(156)

Germany asserted further that the 2004 PLTA was a condition for the 2004 capital increase and, given the expectation of a positive development as from 2008/2009, it was in the interest of Fraport to conclude the 2004 PLTA for at least 5 years. Also, Germany explained that Fraport would have been allowed to take all profits of FFHG until at least 31 December 2024 while being able, in the opposite scenario, to cancel the agreement by 31 December 2010. Therefore, Germany submitted that Fraport would have been able to benefit 100 % from the agreement and to steer FFHG's day-to-day business, while holding only 65 % of its shares. Germany also took the view that the MEOT is supported by the fact that the private investors, making up 30 % of the shareholders of Fraport at that moment, also approved the decision.

5.2.5.   MEASURE 5: COMPENSATION OF FFHG FOR SECURITY CHECKS

(157)

In this regard, Germany declared that no State resources were involved in the measure. Germany referred to the Preussen-Elektra  (35) judgment of the Court of Justice and stated that there can only be State aid where payments are being made by a public or private body designated or established by the State. Germany explained further that in the case of the fees for security checks, those were paid by the airlines to the Land Rhineland-Palatinate and only forwarded to FFHG by the Land as compensation for the security checks which FFHG conducted on behalf of the Land. Hence, according to Germany, in this sense, the fees never became part of the funds of the Land.

(158)

Germany explained that according to §5 Luftsicherheitsgesetz (Air Security Law), it is the State that checks passengers and their luggage in order to protect the security of air traffic against terroristic attacks. Germany asserted further that the authorities charge fees per passenger for this activity to the airlines. Germany stated that the level of the security charge depends on the individual circumstances of the airport and range from EUR 2 up to EUR 10 per passenger. At Frankfurt Hahn, the fee amounts to EUR 4,35 and is therefore appropriate in comparison to other airports.

(159)

This security task can also be transferred by the authorities to an airport operator, which is what happened in this case where the security checks are being performed by FFHG who in turn entrusted an external security company.

(160)

In addition, Germany stated that the security checks fall within the scope of the public policy remit and do not constitute an economic activity.

(161)

Germany shares the opinion of the Commission in this regard, that there should be no overcompensation for the services performed by FFHG. However, Germany emphasised that FFHG was not overcompensated since it has to bear all the costs for the security checks.

5.2.6.   MEASURE 6: DIRECT GRANTS BY LAND RHINELAND-PALATINATE

(162)

Germany clarified that Land Rhineland-Palatinate has made the following payments to FFHG between 2001 and 2004. First, Land Rhineland-Palatinate supported FFHG in some of its infrastructure investments and granted EUR […] to FFHG for this purpose in 2001. According to Germany, those grants were based on decisions taken already in the years 1999 and 2000. Germany argued that at the moment those decisions were taken, State aid rules did not apply to airports as undertakings within the meaning of Article 107(1) of the Treaty.

(163)

Second, Germany stated that the financing of personnel costs for security checks was partially taken over by Land Rhineland-Palatinate for the years 2001 (60 % of total costs), 2002 (50 %), 2003 (40 %) and 2004 (30 %).

(164)

Third, Germany admitted that Land Rhineland-Palatinate had co-financed two scientific studies which had been ordered by FFHG, but which were mainly in the general public interest according to Germany. Germany stated that Land Rhineland-Palatinate had subsidised the first study on the regional economic effects of Frankfurt Hahn airport at 90 % of total costs, and the second study on the development potentials of the freight carrier business at 70 % of the total costs. Germany argued that Land Rhineland-Palatinate had given those subsidies only because of its own interest in the studies and could just as well have ordered the studies itself. Germany did not see how any advantage was conferred on FFHG through this partial financing since the studies are in the public general interest, neither how this financing might distort competition. As far as those studies were of interest to FFHG, FFHG had also contributed to them financially.

5.3.   POSSIBLE STATE AID GRANTED BY FFHG TO RYANAIR AND ALL OTHER AIRLINES TRANSPORTING PASSENGERS

5.3.1.   MEASURE 7: 1999 RYANAIR AGREEMENT

(165)

Concerning the 1999 Ryanair agreement, Germany generally remarked that from the beginning Frankfurt Hahn airport built only very basic infrastructure so that this airport could be a cost-efficient and innovative partner for low-cost airlines. According to Germany, also at other European airports the so-called ‘anchor clients’ are the natural drivers of the initial development of the airport. For Frankfurt Hahn, the anchor client, i.e. the client through whom a foothold in the market could be obtained, was Ryanair.

(166)

Germany argued that when the first agreement with Ryanair was concluded, the concept of a low-cost carrier airport was still in its infancy. Therefore, through this agreement an incentive was given to Ryanair to start flying to the rarely frequented Frankfurt Hahn airport. Germany stated that committing such a big airline to Frankfurt Hahn airport led to the acquisition of more airline agreements for the airport (‘follow-on principle’). Through the so-called ‘domino-effect’, this ultimately also led to an increase in the profits for the non-aviation sector.

(167)

Germany argued that, given these dynamics, airlines such as Ryanair had a great bargaining power, since many other small regional airports tried to conclude agreements with Ryanair at that time.

(168)

Furthermore, Germany stated that no State resources were granted through the 1999 Ryanair agreement. Moreover, Germany argued that the contractual relationship between the operator of the airport and the airline was conferring no advantage unto the airline. In Germany's view, the responsibility for the conclusion of this agreement must be attributed exclusively to the management board since the conclusion of the 1999 Ryanair agreement represented day-to-day business and the supervisory board had taken no decision in this matter. In Germany's view, the Commission cannot consider the conclusion of the 1999 Ryanair agreement as imputable to Germany because the supervisory board did not do anything to prevent it. Such actions do not lie within the responsibilities and tasks of the supervisory board, according to Germany. Also, the criteria mentioned by the Court of Justice in Stardust Marine would be led ad absurdum if the fact that a supervisory body of a publicly held company did not act would be enough to conclude on the imputability of the measure to the State. Therefore, according to Germany the agreement was not imputable in any way to the State.

(169)

Moreover, Germany argued that the 1999 Ryanair agreement did not confer any advantage on Ryanair since any market economy investor would have also concluded such agreement. Germany especially emphasised that this agreement did not induce any losses, contrary to what the Commission argued in its 2008 opening decision, but produced an enormous amount of revenues which by far surpassed the costs incurred.

(170)

In this regard, Germany emphasised that Frankfurt Hahn airport used the ‘single-till-approach’, according to which the revenues of aviation and non-aviation flow into a single pool (‘single till’). Therefore, according to Germany aeronautical and non-aeronautical revenues generated by the airlines and its passengers at the airport have to be taken into account. As Germany stated before, PwC concluded that a market economy investor with a long-term strategy would have signed the 1999 Ryanair agreement, in particular if one considered Frankfurt Hahn airport's situation in 1999. According to Germany, at that time Frankfurt Hahn airport was facing high fixed costs for maintenance of the air and ground infrastructure, whereas the capacity utilisation of the airport was low. Thus, Germany argued, the possibility to generate additional passenger volume was an opportunity to limit losses and acquire clients with growth potential.

(171)

Germany is of the opinion that costs which were decided on before the conclusion of the agreement, such as the costs for the general airport infrastructure and general airport administration (in other words costs that arose irrespective of the 1999 Ryanair agreement), should not be included in the profitability analysis of the 1999 Ryanair agreement, and PwC supports Germany in this opinion. Germany argued especially that it would only be possible for an airport with an existing network of clients to have his clients partially bear the costs of infrastructure measures and that Frankfurt Hahn airport was not in such a position.

(172)

Furthermore, Germany argued that if one were to consider the actual costs for building the new terminal, at most the envisaged passenger volume to be generated by Ryanair could be taken into account. Germany took the view that a depreciation period of 25 years would then be appropriate, which would mean a depreciation of EUR […] per year. Even in case of a depreciation period of 15 years, as suggested by the Commission, Germany argued that this would mean a depreciation of EUR […] per year, so that the overall break-even analysis would still be positive. Therefore, taking into account the time for initiation of Frankfurt Hahn airport, Germany took the view that this would have sufficed for a market economy investor to conclude the agreement.

5.3.2.   MEASURE 8: 2001 SCHEDULE OF AIRPORT CHARGES

(173)

The 2001 schedule of airport charges could not be seen as State aid according to Germany. Germany argued that there was no granting of State resources and refers in this regard to its explanations concerning the 1999 Ryanair agreement (see Section 5.3.1 and especially recital 167). Germany stated that the 2001 schedule of airport charges had generated revenues for FFHG and it was not necessary or possible that the schedule of airport charges would lead to coverage of all costs incurred by FFHG. For such a result, according to Germany, the revenues from the non-aviation sector needed be taken into account as well under the single-till-approach (see recital 169).

(174)

Germany furthermore disputed that the measure was imputable to the State because of the approval of the airport charges by the Rhineland-Palatinate Transport department. This approval did not mean any economic or political dependence, but was simply a regulatory formality requested under German law which every airport, whether publicly owned or not, has to fulfil according to the law. The reason for this law is to protect the airlines from any possible abuse of the monopolistic power of the airport to set prices for its use.

(175)

Moreover, Germany argued that no advantage was granted to Frankfurt Hahn airport through the 2001 schedule of airport charges. It agreed with the Commission that the results of the private market investor test for the 2002 Ryanair agreement, which is based on the 2001 schedule of airport charges and introduces an additional marketing support, can serve as a benchmark. On this basis, since the MEOT is positive for the 2002 Ryanair agreement, Germany argued that no other result can apply to the 2001 schedule of airport charges. Concerning the doubts raised by the Commission in relation to the MEOT, Germany referred to its argumentation in relation to MEOT for the 2002 Ryanair agreement (see recital 178 and following).

(176)

Furthermore, Germany expressly disagreed with the Commission as to the assessment concerning the selectivity of the 2001 schedule of airport charges. Germany argued that the 2001 schedule of airport charges was of a general nature and applied to all airlines using the airport, and that hence it could not be selective or specific. According to Germany, the 2001 schedule of airport charges included no differentiations which would give an advantage to one airline over the other and they did not contain any kind of rebate system either. Therefore, Germany took the view that no airline was granted a selective advantage.

(177)

Finally, Germany argued in relation to the 2001 schedule of airport charges that this schedule was in accordance with market conform behaviour and as such would not be able to distort competition between airports or the competition on the internal market.

5.3.3.   MEASURE 9: 2002 RYANAIR AGREEMENT

(178)

Germany considered, in contrast to the 2008 opening decision, that the 2002 Ryanair agreement did not generate any losses, but instead provided a source of income for FFHG. Concerning the question of imputability of the 2002 Ryanair agreement and the use of State resources, Germany referred to its explanations concerning the 1999 Ryanair agreement (see recital 167 and following). Furthermore, Germany added that in 2002, at the time of conclusion of the agreement, FFHG's shares were already being held mainly by Fraport, whose resources are not State resources and whose actions are not imputable to the State, as Germany already pointed out in relation to the 2001 PLTA (see recital 134 and following).

(179)

According to Germany, the supervisory board of FFHG, who approved the conclusion of the 2002 Ryanair agreement, was not dominated by the State. In this regard, Germany contended that the presentation of FFHG's supervisory board members in recital 18 of the 2008 opening decision was erroneous. Germany stated that according to FFHG's articles of association, Fraport had six representatives and Land Rhineland-Palatinate had eight, out of which three were representatives of local authorities. According to Germany, the members had however different numbers of votes and the majority of votes was always with the private company Fraport. This was due to the fact that Fraport's representatives had 12 votes each, while the representatives of the Land only had 5 votes each and those of the local authorities even had only one vote. Therefore, according to Germany, Fraport had 72 votes while the representatives of the Land and local authorities only had 28 votes. Since the supervisory board decides by simple majority, Germany took the view that it would not have been possible to conclude the 2002 Ryanair agreement without the votes of Fraport and therefore the conclusion of the agreement is not imputable to the State.

(180)

Furthermore, Germany rejected the doubts of the Commission concerning the conferral of an advantage and the MEOT submitted by PwC on this matter. Germany argued that the figure of […] passengers per flight was not overestimated since already in 2002 […] % of Ryanair flights were carried out by a Boeing 737-800 and the average load factor of those flights was […] %, meaning that the number of passengers per plane was in fact on average […] per Ryanair flight. Therefore, Germany took the view that the estimation of the number of passengers of […] was reasonable and not too high, especially since FFHG had taken into account that the change by Ryanair from Boeing 737-200 to Boeing 737-800 would come very quickly.

(181)

As regards the Commission's doubts relating to the cost for general airport infrastructure and general airport administration, Germany referred to its argumentation in relation to the 1999 Ryanair agreement (see recital 171 and following). It also referred to its statements for the 2001 schedule of airport charges (see recital 176) as regards the selectivity of the measure.

5.3.4.   MEASURE 10: 2005 RYANAIR AGREEMENT

(182)

In relation to the question of State resources and imputability, Germany referred to its statements for the 1999 and 2002 Ryanair agreements (see recitals 167 and following, and recitals 178 and following). Furthermore, Germany stated that, at the moment of conclusion of the 2005 Ryanair agreement, the supervisory board of FFHG was constituted in a way that the public authorities were not able to exercise a determining influence on the decision. At that moment Fraport held 156 votes while Land Rhineland-Palatinate and Land Hesse held 42 votes each. Therefore, Germany argued that the State could not have a determining influence as it only possessed 84 out of 240 votes.

(183)

Furthermore, Germany took the view that no advantage was conferred on Ryanair through this agreement. Germany stated that in contrast to the Commission's suggestion in the 2008 opening decision, PwC had been provided with all relevant figures since it could otherwise not have conducted this comprehensive, neutral and independent MEOT. Germany moreover rejected the doubts of the Commission that the investments induced by Ryanair were not allocated appropriately. Germany stated that PwC had made a second evaluation in its supplementary assessment where it explained that a major part of the costs related to investments of a general nature which the airport made independently of the services provided to Ryanair. As far as costs are induced by the handling of Ryanair passengers, these are according to Germany allocated to Ryanair.

(184)

Germany also rejected the doubts of the Commission concerning the effectiveness of the penalty system which was introduced in the 2005 Ryanair agreement. Germany stated that this penalty system reflects market conform behaviour. Germany argued that additional sanctions to the ones agreed upon would have been unnecessary and inappropriate since Ryanair had no exclusive rights to use the airport and was also assuming a risk.

(185)

Moreover, Germany stated that the agreement was not a selective measure since the agreed airport charges were based on the general 2006 schedule of airport charges. Germany also argued that any losses incurred by FFHG were not generated by the 2005 Ryanair agreement but by the necessary investments for Frankfurt Hahn airport, whereas the investments induced by Ryanair had been covered by the revenue generated by the 2005 Ryanair agreement.

5.3.5.   MEASURE 11: 2006 SCHEDULE OF AIRPORT CHARGES

(186)

In relation to the 2006 schedule of airport charges, Germany argued generally that these airport charges had been developed exclusively based on economic considerations taking into account the business model of Frankfurt Hahn airport as a low cost carrier airport, i.e. with the expectation that the costs of operation would be covered in the short term and in the long term a sustainable profit would be generated.

(187)

Concerning the questions of State resources and imputability, Germany referred to its argumentation made in relation to the 1999, 2002 and 2005 Ryanair agreements (see recitals 167 and following, 178 and following and 182 and following) and in relation to the 2001 schedule of airport charges (see recital 173 and following).

(188)

Germany argued that no advantage was conferred upon Ryanair through the 2006 schedule of airport charges. Firstly, Germany justified the different passenger charges which were created in order to provide an incentive to low cost carriers while covering the operational costs of the airport. A reduction of charges according to the volume of passengers, Germany argued, is a common approach at national and international airports, as was already accepted by the Court of Justice. When such volume based reductions are granted, these must be justified on the basis of objective and non-discriminatory criteria and this was the case at Frankfurt Hahn airport, according to Germany. Since the threshold for acquiring rebates was very low, namely 100 000 passengers per year, these rebates were also supporting smaller airlines.

(189)

Secondly, Germany argued that the economic justification of the airport charges relied on the single-till-approach, referring to its statements concerning the 1999 Ryanair agreement (see recital 169). Germany also justified the differentiation according to turn-around-times (hereinafter: TRT) of under or over 30 minutes by explaining that TRT of more than 30 minutes are in fact more cost-intensive. Germany also stated that even though the airport charges were not covering 100 % of the costs, a MEO would still have chosen this schedule of charges since cost-coverage of an infrastructure such as an airport could not be achieved in such a short time. However, FFHG was expecting that through the 2006 schedule of airport charges more passengers would be generated and that by 2008 full cost coverage would be achieved. According to the assessment made by PwC for this schedule of airport charges, this was economically realistic at the moment of introduction of the airport charges, as was also confirmed by PwC's supplementary assessment.

(190)

In relation to the marketing support granted under the 2006 schedule of airport charges, Germany argued that this is in fact not an integral part of the schedule. Germany also argued that any market economy investor would have made the same marketing support available for airlines since there are high economic risks attached to the opening of a new route. This support is exclusively given for newly offered routes, meaning routes which have not been served at all or within the last 24 months. The amount of the support is based on the number of departing passengers served within 1 year. On the basis of criteria such as the temporary routes offered at Frankfurt Hahn airport, the weekly connections and the duration of continuous flight operation, it is ensured that support is in fact leading to an expansion of the network of flights offered by the airlines.

(191)

Germany argued that the marketing support cannot be seen as a one-sided performance by the airport. According to Germany, the promotion of new routes led to a higher profit for the airport since higher passenger numbers would create higher non-aeronautical revenues. Furthermore, Germany explained that the fixing of the amounts of support was based on reasonable considerations.

(192)

Germany also rejected the doubts of the Commission that the risk of marketing was higher for airlines which are not yet active at Frankfurt Hahn airport. For airlines with high passenger numbers servicing an attractive network, Germany argued, requires higher marketing costs which in turn justifies a higher marketing support from the airport, also given that higher passenger numbers increase the profits for the airport. In any case, the amount of support would be no more than one third of the real marketing costs, thereby ruling out any discrimination between airlines already serving Frankfurt Hahn airport and other airlines. Moreover, Germany reasoned that bigger airlines will generally have a larger marketing budget, so the support given will actually be lower in relation to the whole budget than in case of a smaller airline.

(193)

Finally, Germany submitted that the MEOT carried out by PwC established that this marketing support was given in a way that was conforming to the market.

(194)

As regards selectivity of the measure and distortion of competition on the internal market, Germany referred to its statements concerning the 2001 schedule of airport charges (see recitals 176 and following).

(195)

Germany thus argued that the 2006 schedule of airport charges did not involve State aid. Should the Commission establish that the airport charges did constitute State aid, Germany argued in the alternative that the aid was compatible with the internal market.

5.4.   COMPATIBILITY OF THE MEASURES WITH THE INTERNAL MARKET

5.4.1.   COMPATIBILITY OF INVESTMENT AID TO FINANCE AIRPORT INFRASTRUCTURE

(196)

According to Germany, if it would be considered that measures 1 to 6 involved State aid within the meaning of Article 107(1) of the Treaty, insofar as they were aimed at financing airport infrastructure at Frankfurt Hahn airport this aid could be deemed compatible on the basis of Article 107(3) of the Treaty and the 2005 Aviation Guidelines.

5.4.1.1.    Contribution to a well-defined objective of common interest

(197)

Concerning the well-defined objective of common interest, Germany submitted that the financing of airport infrastructure at Frankfurt Hahn airport was always aimed at the objective of improving the regional economic structure of the economically underdeveloped and scarcely populated Hunsrück region.

(198)

In this regard, Germany stated that, firstly, the objective of supporting FFHG was to help overcome the weak structural economy of the Hunsrück region. Germany asserted that Frankfurt Hahn airport is surrounded by a number of areas considered as regions in need of support within the framework of the Gemeinschaftsaufgabe‘Verbesserung der regionalen Wirtschaftsstruktur’ (36), a task shared by the federal and local governments. In this regard, Germany submitted that the four regions around the airport, namely Landkreis Bernkastel-Wittlich, Birkenfeld, Cochem-Zell and Rhein-Hunsrück-Kreis, are on average only half as densely populated as the rest of Land Rhineland-Palatinate. Germany pointed out that for those districts whose economy is shaped by small and medium sized enterprises, employment is the main anchor against a further decrease of the regional economy and Frankfurt Hahn airport plays an important role as an employer and client.

(199)

Secondly, Germany argued that Frankfurt Hahn airport plays an important role in the strategic development of incoming (~ 33 % of passengers corresponding to approximately 1 million passengers in 2005) and outgoing tourism (~ 67 % of passengers) for the Land Rhineland-Palatinate. Germany stated that 88 % of the incoming passengers are staying several nights in the region. Germany submitted that the Frankfurt Hahn airport's incoming tourists generated approximately 5,7 million overnight stays in 2005 (37). According to Germany the number of overnight stays further increased, with Land Rhineland-Palatinate welcoming 8,2 million guests in 2011 which generated 21,5 million overnight stays. Germany pointed out that the number of guests from Eastern and Southern European countries, in particular, has increased and that a large number of flights are operated from those countries to Frankfurt-Hahn. This has resulted in about 198 000 jobs being generated by tourism in Rhineland-Palatinate, according to Germany. The catalysed income and employment effects stem especially from incoming tourism, in which Frankfurt Hahn airport plays a central role as the gateway for tourists into the Hunsrück region, but also into Rhineland-Palatinate more generally, as Germany explained. Germany stated that between 1990 and 2001 the number of tourists has increased by 70 % for the Hunsrück region and by 35 % for Rhineland-Palatinate. According to Germany, during the same period, the number of tourists coming from abroad has increased by 163 % in the Hunsrück region. Since 88 % of incoming tourists from Frankfurt Hahn stay at least one night and more than 80 % of those even stay two to 10 days, they generate a total benefit of about EUR 133,7 million per year. Furthermore, Germany argued that outgoing tourism (67 %) also generates income for Frankfurt Hahn airport through non-aeronautical revenues.

(200)

Thirdly, Germany stated that, taking into account all parts of the airport activities, Frankfurt Hahn airport created 3 063 jobs in the region Hunsrück in 2012 out of which 74 % were full-time positions. According to Germany, 90 % of those employees also live in this region. Germany argued furthermore that through Frankfurt Hahn airport, a movement of young, qualified employees towards other regions is being prevented as well as an economic and social decline of the regional communities and their infrastructure. Furthermore, Germany pointed out that the presence of Frankfurt Hahn airport does not only produce the mentioned direct effects for the labour market, but also substantial indirect effects through an increasing number of economic and touristic activities. In this respect, Germany referred to the positive secondary effects for the region, namely less unemployment and more tax payers, helps to ensure that the municipalities in the region have the financial means to support the local economy. In total, this generated around 11 000 jobs through incoming tourism for all of Rhineland-Palatinate.

(201)

Germany argued that the financing of infrastructure at Frankfurt Hahn airport has also helped reaching the well-defined objective of common interest of combatting air traffic congestion at major EU hubs. In this regard, Germany pointed to the fact that in the past the capacity limits of Frankfurt Main airport have constantly been exceeded. Germany submitted that Frankfurt Hahn airport, especially in the light of its 24 hours operating licence, was therefore serving the goal to provide additional capacities in order to relieve the congestion at Frankfurt Main airport.

(202)

Furthermore, Germany submitted that supporting Frankfurt Hahn airport also serves the objective of common interest to increase the mobility of Union citizens. In this regard, Germany pointed out that Frankfurt Hahn airport is the only German airport offering direct flights to Kaunas (Latvia), Kerry (Ireland), Kos (Greece), Montpellier (France), Nador (Morocco), Plovdiv (Bulgaria), Pula (Croatia), Rhodes (Greece), Santiago de Compostela (Spain) and Volos (Greece). Also, according to Germany, Frankfurt Hahn airport contributes to the job mobility of young people, who can reach the region Hunsrück and Rhineland-Palatinate at low prices. Similarly, Germany pointed out that the high-quality universities and institutions of higher education in Koblenz, Mainz, Kaiserslautern, Trier, Wiesbaden, Mannheim, Bonn, etc., where for the most part no tuition fees are demanded, are now easily accessible to students from all over Europe.

(203)

Germany argued, moreover, that it is also of common interest that the Hunsrück and the surrounding regions of Rhineland-Palatinate are connected to other peripheral regions, for example Limerick, which has already manifested itself through city partnerships. Germany stated that, as the fourth biggest national economy in the world, it is focussing not only on connecting to the major European hubs, but also on connecting the regions with each other. According to Germany, becoming more independent from the major hubs such as Heathrow, Charles de Gaulle, Schiphol or Frankfurt/Main is important for Europe since it will mean not only more direct connections, but also more security especially for the freight business as regional airports are less prone to cancellations due to weather, strikes, terrorism or other cancellation risks.

(204)

Lastly, Germany generally emphasised that the proximity of Zweibrücken airport does not lead to a duplication of airports for the same catchment area, due to the distance of 127 km between Frankfurt Hahn airport and Zweibrücken airport. According to Germany, this distance translates into a travelling time of 1 hour and 27 minutes by car or around 4 hours by train. Therefore, Germany argued that no reasonable worker, freight carrier or tourist whose point of departure lies in the Hunsrück region would go to Zweibrücken airport instead of Frankfurt Hahn airport in order to reach his final destination. Furthermore, Germany submitted that, looking at passenger and air freight traffic between 2005 and 2012, no relationship of substitution between the airports can be deduced. According to Germany, the largest share of passengers of Frankfurt Hahn airport comes from the Hunsrück-Mosel-Nahe region (see Figure 5).

Figure 2

Market shares in passenger air transport of Frankfurt Hahn airport in 2013  (38)

Image

5.4.1.2.    The infrastructure is necessary and proportionate to the objective

(205)

Germany emphasised that the financed investments were necessary and proportionate to the objective of common interest (see recital 197 and the following). According to Germany, the investments were undertaken according to the needs and the constructed infrastructure was necessary for the airport in order to guarantee the connectivity and serve the development of the region and to decongest Frankfurt Main airport. Germany pointed out that the infrastructure was not disproportionate or too large for the needs of users of the airport. Hence, Germany considered that this compatibility condition was met.

5.4.1.3.    The infrastructure has satisfactory medium-term prospects for use

(206)

Germany submitted that before the decision to extend the airport infrastructure was taken, Fraport commissioned traffic forecast studies in order to identify the traffic potential for Frankfurt Hahn airport. Germany provided these studies conducted by aviation experts on behalf of Fraport. Figures 3, 4 and 5 summarise the results of one of these studies regarding the expected passenger and freight traffic development at Frankfurt Hahn airport between 2000 and 2011.

Figure 3

Total potential passengers at Frankfurt Hahn airport in 2000-2010

Image

Figure 4

Potential low-cost passenger traffic (under the assumption that Ryanair sets a base) at Frankfurt Hahn airport in 2001-2011

Image

Figure 5

Total potential freight traffic at Frankfurt Hahn airport in 2001-2010

Image

5.4.1.4.    Access to the infrastructure in an equal and non-discriminatory manner

(207)

According to the information provided by Germany, all potential users of the infrastructure have access to the airport on equal and non-discriminatory terms. Germany submitted that the airport charges paid for the use of the infrastructure were based on commercially justified differentiation and that the schedule of airport charges is available to all potential users in a transparent and non-discriminatory manner.

5.4.1.5.    Trade is not affected contrary to common interest

(208)

Firstly, Germany stated that there are no substitution effects between Frankfurt Hahn airport and other airports in the catchment area, such as Zweibrücken airport and Frankfurt Main airport. According to Germany, undue negative effects on competition with these airports because of the aid granted to FFHG cannot be shown, be it in passenger or in freight traffic. Indeed, Germany argued that in recent years, low cost carriers increasingly had to offer flights to the major hubs since traditional airlines have lowered their prices and started to enter the market of low cost flights. In this regard, Germany stated that regional airports, such as Frankfurt Hahn, are now under a bigger pressure to compete with the hub airports for leisure passengers. Therefore, Germany concluded that the financial support provided has not led to any undue negative effects on competition, but has on the contrary proven appropriate in helping the adaption process towards a stable business model in the future.

(209)

Secondly, Germany argued that the fact that Fraport, before getting involved in Frankfurt Hahn airport, was already the operator of Frankfurt Main airport, shows that no substitution movements from Frankfurt Main towards Frankfurt Hahn airport were to be expected. Instead, Fraport was investing into the possibility to de-congest Frankfurt Main airport and to use the additional, complimentary function of Frankfurt Hahn airport, as a future capacity overload was foreseeable for Frankfurt Main hub. According to Germany, the ban on night flights at Frankfurt Main airport was one of the main factors in this reasoning as Frankfurt Hahn airport had a 24 hours operating license.

(210)

In conclusion, Germany argued that the effects of any aid in favour of FFHG have been limited to positive regional effects for the Hunsrück region, whilst creating no undue negative effects in the relationship to other airports given that Frankfurt Hahn airport is simply used to de-congest Frankfurt Main. Furthermore, Germany stated that, apart from Luxembourg airport, which is already 1 hour and 30 travelling time (111 km) from Frankfurt Hahn airport, there are no other foreign competing airports in the same catchment area. Even in relation to Luxembourg, no negative distortive effect on competition due to the aid granted can be observed according to Germany.

5.4.1.6.    Incentive effect, necessity and proportionality

(211)

Germany stated that in the absence of investment aid, the level of economic activity of the airport would be significantly reduced. Germany submitted that the aid was necessary as it compensated only the costs of financing and a lower amount would lead to lower levels of investment.

5.4.2.   COMPATIBILITY OF OPERATING AID TO FINANCE THE AIRPORT'S OPERATION

(212)

The 2014 Aviation Guidelines provide conditions under which operating and investment aids to airports may be declared compatible with the internal market within the meaning of Article 107(3)(c) of the Treaty. On 17 April 2014, Germany provided its views on the compatibility of the measures under the 2014 Aviation Guidelines. Germany argued that, even if the measures under investigation would constitute operating aid to FFHG, they would be compatible with the internal market according to Article 107(3)(c) of the Treaty and Section 5.1.2 of the 2014 Aviation Guidelines.

5.4.2.1.    Contribution to a well-defined objective of common interest

(213)

Concerning the well-defined objective of common interest, Germany submitted that the coverage of operating costs of FFHG was always aimed at the objective of improving the regional economic structure of the economically underdeveloped and scarcely populated Hunsrück region. In this regard the Germany presented the same reasoning as for the compatibility assessed of investment aid to finance the airport infrastructure (see Section 5.4.1.1).

5.4.2.2.    Need for State intervention

(214)

As regards the need for State intervention, Germany explained why Frankfurt Hahn is making operational losses which need to be covered. In its view, it is a rather ambitious objective for an airport such as Frankfurt Hahn airport with 1-3 million passengers to become profitable and be able to cover its operating costs. According to Germany, it was not possible to realise this ambitious objective in the start-up years since the airport was burdened by very high infrastructure investments which it financed itself on the capital market and for which it had to pay high interest. In addition, Germany stated that since the beginning of the world economic and financial crisis, a stagnation of passenger and especially of freight traffic could be registered.

(215)

Germany submitted that in light of these circumstances, there was a need for State invention to cover the operating losses since FFHG would otherwise have gone insolvent. This would also have resulted, according to Germany, in the withdrawal of the 24 hours operating licence, meaning that during the insolvency FFHG would have had to stop operating all flights, which in turn would have resulted in the loss of clients such as airlines and freight carriers. Germany pointed out that it would then also have become very difficult to find a new operator for the airport.

5.4.2.3.    Appropriateness of the aid measures as policy instruments

(216)

Germany submitted that covering the operating costs was an appropriate measure to achieve the intended objective. Germany argued in this respect that, if Frankfurt Hahn airport would have had to stop operating and would have disappeared from the relevant markets, it would no longer have been possible to achieve the objectives of common interest pursued by the conversion of a former US air base into a full functioning civil aviation airport and developing the Hunsrück region. In this regard, Germany emphasised that in contrast to a market economy investor, a public investor will have to take into account these objectives when considering the alternative of a closure of the airport.

5.4.2.4.    Existence of an incentive effect

(217)

Germany argued that in order to maintain Frankfurt Hahn airport in operation, it was a necessary conditio sine qua non to cover its operating costs as FFHG would otherwise have gone insolvent. A successful operation of the airport was in turn the basis for realising the objectives of common interest as stated in recitals 213 and following. Furthermore, Germany argued that without operating aid, the financial consolidation of the airport would have been unthinkable, given that the airport would have accrued more and more debt instead of making it out of its debts as foreseen in the current austerity programme.

5.4.2.5.    Proportionality of the aid amount (aid limited to the minimum)

(218)

Germany argued that any aid element contained in the loans was limited to the operating losses of and represented the absolute minimum necessary in order to maintain Frankfurt Hahn airport in operation and prevent it from becoming insolvent.

5.4.2.6.    Avoidance of undue negative effects on competition and trade between Member States

(219)

Firstly, Germany stated that there are no substitution effects between Frankfurt Hahn airport and other airports in the catchment area, such as Zweibrücken airport and Frankfurt Main airport. Undue negative effects on competition with these airports because of the operating aid granted to FFHG cannot be shown according to Germany, be it in passenger or in freight traffic. Germany submitted that, on the contrary, Frankfurt Hahn has experienced significant substitution effects of passengers choosing the hubs, such as Köln/Bonn or Frankfurt Main, for flying with low cost carriers rather than from Frankfurt Hahn airport. Indeed, Germany argued that in recent years low cost carriers increasingly had to provide flights to the major hubs since traditional airlines have lowered their prices and started to enter the market of low cost flights. In this regard, Germany stated that regional airports, such as Frankfurt Hahn, are now under a bigger pressure to compete with the hub airports for leisure passengers. Therefore, Germany concluded that the coverage of operating costs has not led to any undue negative effects on competition, but has on the contrary proven appropriate in supporting the adaption process towards a stable business model in the future.

(220)

Secondly, Germany argued that the fact that Fraport, before getting involved in Frankfurt Hahn airport, was already the operator of Frankfurt Main airport, shows that no substitution movements from Frankfurt Main towards Frankfurt Hahn airport were to be expected. Instead, Fraport was investing into the possibility to de-congest Frankfurt Main airport and to use the additional, complimentary function of Frankfurt Hahn airport, given that a future capacity overload was foreseeable for the Frankfurt Main hub. According to Germany, the ban on night flights at Frankfurt Main airport was one of the main factors in this reasoning as Frankfurt Hahn airport had a 24 hours operating license.

(221)

In conclusion, Germany argued that the effects of any in favour of FFHG were limited to the positive regional effects for the Hunsrück region, while creating no undue negative effects in the relationship to other airports as Frankfurt Hahn airport is used to de-congest Frankfurt Main. Furthermore, Germany stated that apart from Luxembourg airport, which is already 1 hour and 30 travelling time (111 km) from Frankfurt Hahn airport, there are no other foreign competing airports in the same catchment area. Even in relation to Luxembourg, no negative distortive effect on competition due to the aid granted can be observed according to Germany.

6.   COMMENTS FROM INTERESTED PARTIES

6.1.   RYANAIR

(222)

Ryanair objects against the decision of the Commission to initiate the formal investigation procedure as regards the 1999, 2002 and 2005 Ryanair agreements with Frankfurt Hahn airport. Ryanair stated that these agreements complied with the market economy investor principle, and hence did not involve State aid.

(223)

Ryanair essentially argues that no advantage has been conferred to it since the agreements reflect normal market conditions. In this respect, Ryanair claimed that the contractual conditions must not be compared to those at other German airports, but those which Ryanair was agreeing with other airports hosting low-cost carriers, such as Blackpool airport and Charleroi airport.

(224)

Concerning the issue of marketing support, Ryanair argued that the charge for new destinations rewards flight frequencies and that the discounts granted by Frankfurt Hahn airport were in line with industry practice as many privately or publicly held airports applied the same or greater level of discounts for new destinations.

(225)

Concerning the application of airport charges, Ryanair argued that normal market charges, i.e. charges which were not abnormally low, satisfy the market economy investor principle. According to Ryanair, the prospect of an immediate profitability was not needed in order to fulfil this principle. The prospect of achieving profitability in the medium- to long-term would be sufficient in Ryanair's opinion. Furthermore, Ryanair contests the Commission's argument that Frankfurt Hahn airport had taken into account only the specific costs of the Ryanair contract as regards the coverage of its costs from the charges paid to Ryanair, and not the costs of the common airport infrastructure and general administration. As concerns the coverage of costs, Ryanair stated that there was never a plan to reserve the use of Frankfurt Hahn airport exclusively to Ryanair. In this regard, Ryanair pointed to the fact that Frankfurt Hahn airport was also used to a significant extent as a freight airport. Furthermore, Ryanair was pointing out that it should pay a lower level of charges compared to other airlines, given that its handling requirements and operations minimise the costs for the airport.

(226)

Ryanair furthermore argued that the conduct of Frankfurt Hahn airport was guided by foreseeable prospects of profitability. According to Ryanair, Frankfurt Hahn airport had performed a financial and strategic analysis prior to concluding the agreements, consistent with what is expected of a market economy investor. Ryanair stated that its commitment to deliver a high passenger volume was since 2005 also secured by a contractual penalty, and that this contract was allocating the bulk of the risk to Ryanair, thus providing for an exceptionally generous deal for Frankfurt Hahn airport. Furthermore, the agreements have allowed Frankfurt Hahn airport to improve its financial situation. At the conclusion of the contract, Frankfurt Hahn Airport was aware that similar agreements of Ryanair with airports throughout Europe had proven to be profitable.

(227)

Lastly, Ryanair points out that its agreements with Frankfurt Hahn did not contain any exclusivity clause, so other airlines could and do avail of the same terms and conditions as Ryanair, provided they were ready to offer the same commitment to the airport as Ryanair.

(228)

Furthermore, Ryanair submitted a series of notes prepared by Oxera, and an analysis prepared by Professor Damien P. McLoughlin.

Oxera Note 1 — Identifying the market benchmark in comparator analysis for MEOTs. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

(229)

Oxera considers that the Commission's approach of only accepting comparator airports in the same catchment area as the airport under investigation is flawed.

(230)

Oxera also argues that market benchmark prices obtained from comparator airports are not tainted by State aid given to surrounding airports. Therefore, it is possible to robustly estimate a market benchmark for the MEOTs.

(231)

This is because:

(a)

comparator analyses are widely used for MEOTs outside of the field of State aid;

(b)

companies affect each other's pricing decisions only to the extent that their products are substitutes or complements;

(c)

airports in the same catchment area do not necessarily compete with each other, and the comparator airports used in the submitted reports face only limited competition from State-owned airports within their respective catchment areas (less than 1/3 of commercial airports within the catchment areas of the comparator airports are fully State owned, and none of them were subject to State aid investigations (as of April 2013));

(d)

even where comparator airports face competition from State-owned airports within the same catchment area, there may be reasons to believe their behaviour is in line with the MEO principle (for example, where there is a large private ownership stake or where the airport is privately managed);

(e)

MEO airports will not set prices below incremental cost.

Oxera Note 2 — Principles underlying profitability analysis for MEOTs. Ryanair State aid cases, prepared for Ryanair by Oxera, 9 April 2013

(232)

Oxera argues that the profitability analysis undertaken by Oxera in its reports submitted to the Commission follows the principles that would be adopted by a rational private sector investor and reflects the approach apparent from Commission precedents.

(233)

The principles underlying the profitability analysis are:

(a)

the assessment is undertaken on an incremental basis;

(b)

an ex ante business plan is not necessarily required;

(c)

for an uncongested airport, the single till approach is the appropriate pricing methodology;

(d)

only those revenues associated with the economic activity of the operating airport should be considered;

(e)

the entire duration of the agreement, including any extensions, should be considered;

(f)

future financial flows should be discounted in order to assess profitability of the agreements;

(g)

incremental profitability of Ryanair agreements to the airports should be assessed on the basis of estimates of the internal rate of return or net present value (NPV) measures.

Analysis of Professor Damien P. McLoughlin — Brand building: why and how small brands should invest in marketing, prepared for Ryanair, 10 April 2013

(234)

The paper aims to set out the commercial logic underlying regional airports' decisions to buy advertising on Ryanair.com from AMS.

(235)

The paper argues that there are a large number of very strong, well known, and habitually used airports. Weaker competitors must overcome static buying behaviour of consumers to expand their business. Smaller regional airports need to find a way to consistently communicate their brand message to as wide an audience as possible. Traditional forms of marketing communication require expenditure beyond their resources.

Oxera Notes 3 and 4 — How should AMS Agreements be treated within the profitability analysis as part of the market operator test?, 17 and 31 January 2014

(236)

Ryanair submitted further reports by its consultant Oxera. In these reports, Oxera discusses the principles which, according to the airline, should be taken into account as part of the MEOT in the profitability analysis of, on the one hand, airport services agreements between Ryanair and airports and, on the other hand, the marketing agreements between AMS and the same airports. Ryanair emphasised that those reports do not in any way change its position presented earlier that the airport service agreements and the marketing agreements should be analysed under separate MEOTs.

(237)

The reports indicate that the profits generated by AMS should be included as revenues in a joint analysis regarding profitability while the expenses of AMS would have to be incorporated in the costs. To do this, the reports suggest the application of a cash-flow-based methodology to the joint profitability analysis, meaning that the expenditure by airports on AMS could be treated as incremental operating expenses.

(238)

The reports emphasise that marketing activities contribute to the creation and support of the brand's value, which helps to generate effects and benefits not only for the duration of the contract, but also after its termination. This would especially be the case if, due to the fact that Ryanair has concluded an agreement with an airport, other airlines establish themselves at the airport, which will in turn attract more shops to install themselves there and therefore bring in more non aeronautical revenues for the airport. According to Ryanair, if the Commission proceeds to undertake a joint analysis of profitability, those benefits have to be taken into account by treating the expenses of AMS as incremental operating costs, net of AMS payments.

(239)

Furthermore, Ryanair considers that a terminal value (reflecting the value generated after the termination of the agreement) would have to be included in the projected incremental profits at the end of the airport services agreement. The terminal value could be adapted on the basis of a ‘renewal’-probability, measuring the expectation that profits will persist after the termination of the agreement with Ryanair or if similar conditions are agreed with other airlines. Ryanair considers that it would then be possible to calculate a lower limit for benefits generated jointly by the agreement with AMS and the airport service agreement, reflecting the uncertainties of incremental profits after the termination of the airport services agreement.

(240)

To supplement this approach, the reports present a synthesis of the results of studies on the effects of marketing on the value of a brand. Those studies consider that marketing can support the value of a brand and can help to build a customer base. According to the reports, in the case of an airport, marketing on Ryanair.com significantly increases the visibility of the brand. The reports moreover state that smaller regional airports wishing to increase their air traffic can therefore especially increase the value of their brand by concluding marketing agreements with AMS.

(241)

The reports lastly indicate that a cash-flow-based approach is to be preferred over a capitalisation approach in which the costs of marketing services provided by AMS would be treated as capital expenditure on an intangible asset (that is, the value of the brand) (39). The capitalisation approach would only take into account the proportion of marketing expenditure that is attributable to the intangible assets of an airport. The marketing expenses would be treated as capital expenditure in an intangible asset, and then depreciated for the duration of the contract, taking into consideration a residual value at the foreseen termination of the airport services agreement. This approach would not take into account the incremental profits which the conclusion of the airport services agreement with Ryanair would bring about and it is also difficult to calculate the value of the intangible asset due to the expenses of the brand and the time period of use of the asset. According to the reports, the cash-flow method is also more appropriate than a capitalisation approach since the latter would not capture the positive benefits to the airport that are expected to arise as a result of signing the airport services agreement with Ryanair.

Oxera — Economic MEOP assessment: Frankfurt Hahn Airport, 11 August 2014:

(242)

Ryanair submitted a further report prepared by Oxera regarding the agreements between Frankfurt Hahn airport and Ryanair of 1999, 2002, 2005. The assessment of the 2005 Ryanair agreement takes also into account the marketing agreement concluded directly with Land Rhineland-Palatinate. Oxera's assessment of the Ryanair agreements is based on the information available to the airport around the time of signing the agreement.

The 1999 Ryanair agreement:

(243)

According to the report, the analysis of the 1999 Ryanair agreement has been based on the business plan document produced by FFHG on 25 May 1999, a document which has been drawn up before signing the agreement. The report states that the aeronautical revenues have been calculated based on the charges specified in the 1999 Ryanair agreement. The estimates of incremental operating costs have been based on FFHG's own estimates. The report points out that the costs of fire fighting, which are usually considered as falling within the public policy remit, were not taken into account. The same applies to infrastructure investments.

Table 16

Oxera's incremental profitability assessment of the 1999 Ryanair agreement  (40)

[…]

The 2002 Ryanair agreement:

(244)

The report explains that the forecasts of total passenger numbers have been obtained from FFHG's business plan drawn up in November 2002, as it is the only document available that contains traffic forecasts over the relevant period. According to the report, the aeronautical revenues have been calculated based on the charges specified in the 2002 Ryanair agreement. Non-aeronautical revenues have been obtained from FFHG's business plan drawn up in November 2002, as it is the only document that contains projections of non-aeronautical revenues that was drawn up around the time of the 2002 Ryanair agreement.

(245)

The estimates of operating costs per passenger have been based on FFHG's own analysis of incremental operating costs per Ryanair departing passenger. The schedule of investments has been drawn up in November 2000.

Table 17

Oxera's incremental profitability assessment of the 2002 Ryanair agreement  (41)

[…]

6.2.   LUFTHANSA AND BDF

(246)

Lufthansa and the Bundesverband der Deutschen Fluggesellschaften e.V. (Federal Association of German Air Carriers, hereinafter: BDF) have submitted comprehensive information and comments on the 2008 opening decision which shall be summarised below.

(247)

Lufthansa and BDF stated that the losses of FFHG and its predecessors since 1998 and until 2009 amount to EUR 161 million and that FFHG did not, contrary to what it claims, reach a positive EBITDA in 2006 either. In this respect, Lufthansa and BDF claim that the slightly positive EBITDA was only possible after the release of legacy liabilities, which reduced the operational losses. Hence, Lufthansa and BDF suggest that the Commission should seek to get access to all of FFHG's annual balance sheets. In this regard Lufthansa argued, that in contrast to what Germany has stated, the depreciation of investments did not increase much during the years and cannot be considered very high in comparison to the costs related to marketing support for Ryanair, which are included in ‘other operating costs’, as Table 18 shows. Lufthansa and BDF also suggest that the Commission should request the full, non-publicised annual balance sheets of FFHG.

Table 18

Relationship of depreciation and other operating costs

In EUR

2000

2001

2002

2003

2004

Depreciations

4 477 257

5 325 627

5 423 627

6 045 387

7 699 330

Losses

8 217 199

13 355 347

19 993 895

17 832 868

16 797 889

Other operational costs

[…]

5 692 808

11 434 306

10 521 273

11 454 363

(248)

Lufthansa and BDF also claimed that a study submitted by Germany containing statistics on the effects of FFHG on tourism in Hunsrück and Land Rhineland-Palatinate should not be taken into account as the numbers on passenger growth and job growth around the airport were provided by FFHG and remained unchecked by the authors of the study. Lufthansa and BDF claimed furthermore that it was known, even when the study was conducted, that the numbers given were not realistic.

(249)

Furthermore, Lufthansa and BDF submitted that FFHG did not have a clear business model, which could be shown by the changing plans for additions to the airport, such as malls or places for excursions, which did not have anything to do with the operation of the airport. Furthermore, according to Lufthansa and BDF, the conflicting declarations by FFHG that Frankfurt Hahn airport should have been profitable first by 2005, then by 2008 and then 2013, point in the same direction that no consistent business plan was being followed. The last prognosis made, namely that Frankfurt Hahn airport should become profitable from 2016 onwards, would therefore also seem doubtful and this prognosis was apparently even based on the assumption that further, substantial investments would be made. The origin of such investments was, however, completely unclear according to Lufthansa and BDF.

(250)

Moreover, Lufthansa and BDF stated that, in contrast to what Germany is claiming, PwC has not provided a proper MEOT since its assessment does not take into account the case law of the Court of Justice on at least two points.

(251)

Firstly, Lufthansa and BDF referred to the argumentation of Germany that the accumulated losses of FFHG could be compensated by Fraport as its shareholder. In this regard, Lufthansa and BDF argued that it is not important whether losses can be compensated within a group of companies, but whether the individual measures taken as such are measures which a market economy investor would have taken as well (or not) and that this argumentation was therefore unacceptable.

(252)

Secondly, Lufthansa and BDF submitted that the argumentation in the assessment by PwC was not sufficient to prove that a market economy investor would have taken the same decision since PwC argued, for example concerning the 1999 Ryanair contract, that a reduction of losses by increasing the passenger volume could be achieved. Lufthansa and BDF referred to the case WestLB, according to which a market economy investor would normally ‘seek to achieve the maximum reasonable return on his investment, according to the particular circumstances and the satisfaction of his short-, medium- and long-term interests, even where he is investing in an undertaking of which he is already a shareholder’ (42). Hence a reduction of losses would not suffice for a measure to pass the MEOT and therefore PwC already disregarded the case law of the Court of Justice in this respect, Lufthansa and BDF argued. Also, Lufthansa and BDG pointed out that the assessment submitted on behalf of FFHG did not include any own MEOT as it only referred to the test made by PwC.

(253)

In addition, Lufthansa and BDF contested the argument made by PwC in relation to the capital increases that long planning horizons of more than 30 years and amortisation of investments over 20 years are normal business practice for infrastructure investments (see recital 103 of the 2008 opening decision). In this respect, Lufthansa and BDF claimed that the comparisons made by PwC to concession contracts at Budapest airport, Da Vinci and Campiano airports, Sparta airport and Belfast City airport were completely indefensible since the situation of none of these airports is even remotely comparable to the situation of FFHG and Frankfurt Hahn airport. Lufthansa and BDF argued that unlike all of the airports mentioned by PwC, Frankfurt Hahn was a military airport at which the major part of the civil use started only in 1999 and was then supported by infrastructure developments exactly matching Ryanair's needs. This is why, according to Lufthansa and BDF, the break-even analysis is not accurate since the costs for the terminal were not taken into account.

(254)

Lufthansa and BDF also argued on the basis of the 2008 opening decision that the overcompensation of security fees clearly constituted State aid. In this regard Lufthansa and BDF advanced the argument, firstly, that the security checks had not been publicly procured. In the opinion of Lufthansa and BDF, the rules of public procurement have not been followed and therefore, by default, the service has not been procured at the most advantageous price. Secondly, Lufthansa and BDF argued that, according to German law, these security fees must be oriented towards the actual and necessary costs. However, Lufthansa and BDF pointed out that the fees at Frankfurt Hahn airport have remained at the same level between 2003 and 2008, whereas at other airports traffic fluctuations could be observed.

(255)

In contrast to the comments from Germany concerning the legal assessment, Lufthansa and BDF were of the opinion that the aid granted by Fraport to FFHG originated from State resources. According to Lufthansa and BDF, Fraport had expressly admitted in all of its annual balance sheets between 2001 and 2006 that because of a consortium agreement between the public shareholders, it is a ‘dependent, publicly held undertaking’. In this regard, Lufthansa and BDF point to a number of indications that the funds of Fraport were State resources according to the judgment in case Stardust Marine  (43) and Article 2(1)(b) of Commission Directive 2006/111/EC (44).

(256)

Furthermore, Lufthansa and BDF considered that the actions of Fraport are also imputable to the State. In this regard, Lufthansa and BDF referred to indications for imputability such as the fact that FFHG's meeting of shareholders, meaning Land Rhineland-Palatinate and Fraport, agreed to the conclusion of the Ryanair agreements. Furthermore, Lufthansa and BDG claimed that there is a remarkable temporal relationship between the second capital increase and the application for recognition of a common airport system in 2005. According to Lufthansa and BDF, within two weeks the shareholders of FFHG decided on the capital increase, which resolved FFHG's financial difficulties, and subsequently the application for a common airport was made by Germany. Lufthansa and BDF therefore claimed that the public shareholders made this application possible through the new capital increase.

(257)

Lufthansa and BDF moreover claimed that no market economy investor would have undertaken to finance and invest into FFHG, since according to the case law of the Court of Justice, a market economy investor is always profit oriented. A mere reduction of losses would not be enough to convince a market economy investor and he would not take social or local political considerations into account.

(258)

Lastly, Lufthansa and BDF claimed that the aid granted to FFHG for new infrastructure, as well as the aid granted to Ryanair are incompatible with the internal market under the 2005 Aviation Guidelines as well as under the 2014 Aviation Guidelines. In this regard, Lufthansa and BDF claimed that in this case there was no conversion of a military airport, given that the airport had been built 6 years after the end of military use. Furthermore, they argued that Frankfurt Hahn airport did not decongest Frankfurt Main airport and especially that it was doubtful whether the airport helped the development in the region and created jobs there. According to Lufthansa and BDF, this argument could in any case not justify the aid since the job generation started only in 1999, six years after the military use of the airport had ended. Even if one would accept this as a justification, the numbers given by FFHG in its studies would be completely overestimating the effects on the economy and job creation.

(259)

Furthermore, Lufthansa and BDF claimed that the rebates granted through the airport charges for passenger numbers of 1 to 3 million or more were discriminatory. Lufthansa and BDF argued that only Ryanair was eligible for these rebates as it was the only airline generating that many passengers and Frankfurt Hahn airport did not even have the capacity to host another airline which could have provided such passenger numbers. The granting of marketing support was also discriminatory in the opinion of Lufthansa and BDF as the proportion of the marketing support is dependent on the number of passengers the airline has already brought to the airport and the number of destinations already offered by the airline at the airport. Since these factors do not have any relation to the amount of marketing support for new destinations, this system will provide Ryanair with a much higher amount of marketing support, which according to Lufthansa and BDF is unjustifiable.

(260)

As far as operating aid for the airport is concerned, according to Lufthansa and BDF emphasised it is obvious that the single-till-approach applied at Frankfurt Hahn airport does not work since overall the revenues are not able to cover the losses. Therefore, the compensation of these losses through the financing of FFHG constitutes operating aid.

(261)

As concerns aid to Ryanair, Lufthansa and BDF stated that Ryanair has received advantages through the airport charges and the agreements with Frankfurt Hahn airport. Lufthansa and BDF claimed that no market economy investor would have taken these measures since Frankfurt Hahn airport is obviously unable to operate profitably on this basis. Lufthansa and BDF claimed that through the 2001 and 2006 schedule of airport charges, Ryanair had been given an additional advantage in form of the additional reductions granted in relation to the total volume of passengers departing with the airline.

(262)

Lufthansa and BDF argued that, as Fraport has to be considered as a publicly held undertaking, FFHG is a publicly owned undertaking and therefore its resources have to be considered as State resources. The advantages granted by FFHG to Ryanair are also imputable to the State, according to Lufthansa and BDF, since the PLTA also comprises a control agreement (‘Beherrschungsvertrag’) and the public shareholders can steer the behaviour of FFHG. In this regard, Lufthansa and BDF argued that it should also be taken into account that the manager of FFHG is always an employee of Fraport.

(263)

Lufthansa and BDF argued that none of the aid to Ryanair is compatible with the internal market. The Ryanair agreements and the 2001 schedule of airport charges should be assessed directly under Article 107(3)(c) of the Treaty. In this regard, the Commission decision in Chareloi  (45) should also be taken into account. On this basis Lufthansa and BDF stated that the aid to Ryanair could not be justified since it constituted partly operating aid, which could not be justified at all, and partly start-up aid, which pursued no legitimate goal and was not granted in a transparent and non-discriminatory manner. Lufthansa and BDF furthermore stated that the 2006 schedule of airport charges is not compatible with the 2005 Aviation Guidelines, since the conditions for compatibility in point 79 of the guidelines are not fulfilled in relation to the marketing support and the operating aid granted through the passenger fees. This is due to the fact that the marketing support is discriminatory, Lufthansa and BDF explained, and that the passenger fees do not have a limited duration and have no incentive effect. Furthermore, in Lufthansa's and BDF's opinion all of the aid granted to Ryanair is of a cumulative nature and hence is not in line with the compatibility conditions. Therefore, in their view, it should be considered incompatible with the internal market.

6.3.   ASSOCIATION OF EUROPEAN AIRLINES (AEA)

(264)

The AEA stated that the fact that FFHG has been loss making since its opening and that the announced date for break-even has been constantly postponed shows that the business model is at best questionable and that there is a blatant disrespect of the market economy investor principle.

(265)

Concerning the possible aid to Ryanair, AEA was of the opinion that this aid has had negative effects for competing airlines and that the agreements with Ryanair constituted discriminatory measures. According to AEA, these agreements are discriminatory as their conclusion coincides with the beginning of any commercial use of the airport, meaning that the airport was tailor-made for Ryanair's needs.

6.4.   AIR FRANCE

(266)

Air France remarked generally that it strongly supported the Commission's action in State aid matters in the aviation sector. More specifically in relation to the situation at Frankfurt Hahn airport, Air France concurred with the Commission's preliminary assessment that the measures in favour of FFHG and Ryanair constituted State aid. Air France believes in particular that the three commercial agreements with Ryanair constitute a clear-cut discriminatory measure as no other airlines operating in the same airport system have ever been offered the same conditions. Therefore, Air France concluded that such measures have inevitably been contributing to a significant distortion of competition between intra-EU carriers within the internal market.

6.5.   COMMENTS SUBMITTED ON THE IMPLEMENTATION OF THE 2014 AVIATION GUIDELINES TO THE PENDING CASE

6.5.1.1.    Lufthansa

(267)

Lufthansa stated that the 1999, 2002 and 2005 Ryanair agreements constitute incompatible State aid and provides further comments on the respective agreements.

(268)

With regard to the 1999 Ryanair agreement, Lufthansa submitted that the costs for Terminal 1 at the airport are to be fully taken into account when applying the MEOT. To support this, Lufthansa refers to the statement of Ryanair in a parliamentary hearing. According to Lufthansa, Ryanair stated that the airport was built for them. Lufthansa disputed that a proportion of the cost of the terminal could be attributed also to other airlines.

(269)

In the opinion of Lufthansa, the MEOT carried out by PwC for the 2002 Ryanair agreement underestimates the marketing costs for the opening of new routes in 2002. According to Lufthansa it was publicly known that at least 7 new routes would be opened in 2002. Hence, Lufthansa stated that the marketing support was underestimated by at least EUR […] in 2002.

(270)

With regard to the 2005 Ryanair agreement, Lufthansa stated that the passenger volume forecasts underlying the MEOT of the 2005 Ryanair agreement appear to be overestimated. Lufthansa stated that in the worst case the airport expected that Ryanair would bring 3 million passengers between 2006 to 2012. However, according to Lufthansa this expectations were not based on a real commitment by Ryanair.

(271)

Moreover Lufthansa stated that the Land Rheinland-Palatinate and Ryanair concluded a marketing agreement in 2005, which is not part of the 2008 opening decision (46). According to Lufthansa, the agreement grants Ryanair marketing support of least EUR […] million per year.

(272)

With regard to aid to the airport for the financing of infrastructure, Lufthansa is of the opinion that the infrastructure is dedicated to Ryanair and hence the compatibility criteria in the guidelines do not apply.

6.5.1.2.    Transport & Environment

(273)

This non-governmental organization made comments criticizing the 2014 Aviation Guidelines and decisions of the Commission regarding the aviation industry so far, for their allegedly negative effects on the environment.

7.   COMMENTS FROM GERMANY ON THIRD PARTY SUBMISSION

7.1.   ON THE COMMENTS FROM RYANAIR

(274)

Concerning the comments from Ryanair, Germany stated that these comprehensively supported its observations and supplemented these from the side of the airline. Ryanair's comments especially underline, according to Germany, that the contracts with Ryanair are such as any market economy investor would have concluded and that in fact many other European airports have concluded similar agreements with Ryanair.

(275)

Furthermore, Germany emphasised that the airport charges as established by FFHG were according to Ryanair absolutely normal in the low-cost carrier sector and were not especially advantageous for Ryanair.

7.2.   ON THE COMMENTS FROM LUFTHANSA AND BDF

(276)

Concerning the comments from Lufthansa, Germany rejected the argument that the results of the study submitted on the effects of Frankfurt Hahn airport on the regional economy and the number of jobs created would be questionable and emphasised instead that the study is based on the well-founded economic research conducted by the expert authors. Germany submitted that of course the numbers in the study are a forecast and would not necessarily always correspond to the numbers actually realised, especially in the context of the world economic crisis. According to Germany, the forecast was realistic at the moment of publication and led to the conclusion by PwC, from an ex ante perspective, that FFHG has acted as a market economy investor.

(277)

Germany also rejected the doubts of Lufthansa and BDF that profitability will not be reached at Frankfurt Hahn airport. Germany stated that the forecast when profitability will be achieved may have to be adapted with time due to multiple factors, such as the investment and expansion decisions of the undertaking. In any case, PwC has put forward reliable evaluations that all the measures under investigation were economically reasonable.

(278)

The claim by Lufthansa and BDF that no real MEOT justification exists are therefore unfounded according to Germany, especially since Lufthansa did not have access to the MEOT of PwC.

(279)

Concerning the capital increases, Germany stated that there was no closure of Frankfurt Hahn airport; rather, the airport was has been used for civil aviation since 1993 and up until the moment that Fraport got involved. Germany explains that Frankfurt Hahn airport was therefore not a project to provide an airport for Ryanair, as Lufthansa claimed, but was designed as a low-cost airport to be used according to equal, non-discriminatory conditions by any airline. That some airports are being used more by certain airlines than by others is normal, Germany claimed. In fact, Lufthansa itself has for example an exclusive terminal at Munich airport.

(280)

Furthermore, Germany stated that there was no discrimination concerning the marketing support scheme. The levels of marketing support granted have been set up in a reasonable, non-discriminatory manner. The payment of marketing support in instalments, as criticised by Lufthansa and BDF, only served the purpose of minimising the risks in case a route would be closed again soon after its opening. This danger, Germany argued, was not present to the same extent if an airline was already present at Frankfurt Hahn airport and already served more than 1 million passengers. According to Germany, Ryanair has furthermore not received any secret or unjustified marketing support from FFHG.

(281)

In relation to the question of whether there was any aid coming from State resources, Germany argued that in contrast to what Lufthansa and BDF claimed, no conclusions could be drawn from the annual balance sheets of Fraport in which the undertaking stated that it is a ‘dependent, publicly held undertaking’. This statement was only included in the annual financial report in order to present the relationship to undertakings and persons close to Fraport, but does not have any implications for the State aid assessment. In any case, no imputability of the capital increases to the State could be derived from this application.

(282)

Concerning the question whether the aid granted to FFHG would be compatible with the internal market, Germany stated that Lufthansa's and BDF's argument that civil use began only six years after the termination of military use would be incorrect as well as irrelevant. Civil use had started directly in 1993 and the infrastructure for civil use was already there. The expansion of the infrastructure in order to make the airport ready for commercial passenger traffic was inevitable.

(283)

Germany rejected Lufthansa's and BDF's argument that Frankfurt Hahn airport did not help to decongest Frankfurt Main airport and pointed out that Lufthansa and BDF had not substantiated their claim with any evidence.

(284)

Germany especially opposed the argument of Lufthansa and BDF that it was doubtful whether Frankfurt Hahn airport generated a great number of jobs. In this regard Germany argued that it could not be doubted that Frankfurt Hahn airport had had considerable influence on the economic and social development of the structurally weak region around it.

(285)

Furthermore, Germany dismissed the discriminatory effects which Lufthansa and BDF claimed the passenger fees and marketing support to have. Germany ensured that these had been established on the basis of economic considerations and calculations and were available to airlines in a uniform and non-discriminatory way.

(286)

Germany lastly rejected the doubts raised by Lufthansa and BDF with regard to the single-till-approach at Frankfurt Hahn airport. Germany stated that this approach was economically justified, as the MEOT by PwC had shown, and that it would not have been possible to attract airlines to Frankfurt Hahn airport if the passenger fees would have been so high as to guarantee a profitable operation of the airport from the beginning.

(287)

Concerning the claims that Lufthansa and BDF advance in relation to aid granted to Ryanair through the 1999, 2002 and 2005 Ryanair agreements, Germany referred to the detailed MEOTs carried out by PwC and stated that these agreements cannot constitute State aid as they are complying with the market economy investor principle. According to Germany, the calculations presented by Lufthansa and BDF are implausible and based on wrong passenger numbers. Germany again pointed out that it was not possible to operate an airport like Frankfurt Hahn profitably from the very beginning, but only on a medium- to long-term basis.

(288)

Germany also stated that the doubts which Lufthansa and BDF raised in relation to the question whether the aid to Ryanair could be justified were unfounded. Germany moreover argued that even if the marketing support would constitute an advantage to Ryanair, which it did not, according to Germany, even in that case such aid would be compatible with the internal market on the basis of the criteria set out in recital 79 of the 2005 Aviation Guidelines.

7.3.   ON THE COMMENTS FROM AIR FRANCE AND THE AEA

(289)

Germany pointed out in relation to the comments from AEA that these were not substantiated with any evidence. Furthermore, Germany argued that even if, as AEA stated, there were negative effects for competing airports, then these airports had not complained about this and had not even commented on the 2008 opening decision.

8.   ASSESSMENT — EXISTENCE OF AID

(290)

By virtue of Article 107(1) of the Treaty ‘… any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’

(291)

The criteria in Article 107(1) of the Treaty are cumulative. Therefore, in order to determine whether the measure in question constitutes aid within the meaning of Article 107(1) of the Treaty all of the following conditions need to be fulfilled. Namely, the financial support should:

(a)

be granted by the State or through State resources;

(b)

favour certain undertakings or the production of certain goods;

(c)

distort or threaten to distort competition; and

(d)

affect trade between Member States.

8.1.   AID NATURE OF THE MEASURES GRANTED TO THE AIRPORT

8.1.1.   MEASURE 1: 2001 PLTA

APPLICABILITY OF STATE AID RULES TO AIRPORTS

(292)

Germany submits that the 2001 PLTA was put into place before the public funding of airports was considered to constitute State aid and was not altered until it was replaced by the 2004 PLTA.

(293)

Hence, the Commission must first establish whether the State aid rules were applicable to the 2001 PLTA at the time it was concluded. In that context, the Commission recalls that an aid measure constitutes existing aid pursuant to Article 1(b)(v) of Regulation (EC) No 659/1999 where it can be established that at the time the aid measure was put into effect, it did not constitute State aid, and subsequently became aid due to the evolution of the common market and without having been altered by the Member State.

(294)

Indeed, in the past, the development of airports was often determined by purely territorial considerations or, in some cases, military requirements. The operation of airports was organised as part of the administration rather than as a commercial undertaking. Competition between airports and airport operators was also limited and developed gradually. Taking into account those conditions, the financing of airports and airport infrastructure by the State was for some time considered by the Commission as a general measure of economic policy which could not be controlled under the State aid rules of the Treaty.

(295)

However, the market environment has changed. In the Aéroports de Paris judgment, the General Court stated that the operation of an airport, including the provision of airport services to airlines and to the various service providers within airports, is an economic activity (47). Consequently, since the adoption of that judgment (12 December 2000) it is no longer possible to consider the operation and construction of airports as a task carried out by the administration within the public policy remit, outside the ambit of State aid control.

(296)

In its Leipzig/Halle Airport judgment, the General Court confirmed that it is a priori not possible to exclude the application of State aid rules to airports as the operation of an airport and the construction of airport infrastructure is an economic activity (48). Once an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) of the Treaty, and the Treaty rules on State aid therefore apply (49).

(297)

FFHG has been engaged in constructing, maintaining and operating Frankfurt Hahn airport. In this context, it has offered airport services and charged users — commercial aviation operators as well as non-commercial general aviation users — for the use of the airport infrastructure, thereby commercially exploiting the infrastructure. Therefore, it must be concluded that FFHG has been engaged in an economic activity as from the date of the Aéroports de Paris judgment (that is to say 12 December 2000) onward.

(298)

However, in the light of the developments (as set out in recitals 294 to 296) the Commission considers that, prior to the judgment of the General Court in Aéroports de Paris, public authorities could legitimately consider that financing measures with regard to airports did not constitute State aid and accordingly did not need to be notified to the Commission. Hence, the Commission cannot put into question individual financing measures (not awarded on the basis of an aid scheme (50)) which were definitively adopted before judgment in Aéroports de Paris under State aid rules.

(299)

Accordingly, the Commission has to assess first, whether the 2001 PLTA was put into place before the judgment in Aéroports de Paris (12 December 2000) and second whether that measure was later amended.

(300)

The 2001 PLTA was irrevocably agreed on 31 August 1999 and confirmed in a notarial deed of 24 November 2000. Therefore, the Commission considers that the 2001 PLTA was irrevocably put in place before the Aéroports de Paris judgment. Moreover, the 2001 PLTA was not amended until it was replaced by the 2004 PLTA.

(301)

Hence, at that time the public authorities could legitimately consider that a PLTA to cover annual losses of FFHG did not constitute State aid.

CONCLUSION

(302)

In the light of the considerations in recitals 292 and following, the Commission concludes that, at the time the 2001 PLTA, was put into place public authorities could legitimately consider that a PLTA to cover annual losses of FFHG did not constitute State aid.

8.1.2.   MEASURE 2: 2001 CAPITAL INCREASE

(303)

In 2001, Fraport and Land Rhineland-Palatinate increased FFHG's capital by EUR 27 million. Fraport contributed EUR 19,7 million; Land Rhineland-Palatinate contributed EUR 7,3 million. The capital increase was approved first by the supervisory board of Fraport (as regards its contribution) on 14 December 2001 and subsequently by a resolution of the shareholders of FFHG dated 9 January 2002 (51). The capital increase by Fraport and the Land became effective on 9 January 2002.

8.1.2.1.    Notion of undertaking and economic activity

(304)

As was analysed in recitals 293 and following, since 12 December 2000 FFHG has to be considered as an undertaking exercising an economic activity for the purposes of Article 107(1) of the Treaty.

8.1.2.2.    State resources and imputability

(305)

In order to constitute State aid, the measures in question have to be financed from State resources and the decision to grant the measure must be imputable to the State.

(306)

The concept of State aid applies to any advantage granted through State resources by the State itself or by any intermediary body acting by virtue of powers conferred on it (52). Resources of local authorities are, for the application of Article 107(1) of the Treaty, State resources (53). In that respect, it is constant Commission practice to consider that irrespective of whether a public undertaking is loss-making or profit-making, all its resources are to be considered as State resources (54).

Land Rhineland-Palatinate's share in the 2001 capital increase

(307)

Land Rhineland-Palatinate has financed its share of the 2001 capital increase directly from its general budget. Thus, it can be concluded that that measure is financed through State resources and also imputable to the State.

Fraport's share in the 2001 capital increase

State resources

(308)

In Germany's opinion, Fraport's share in the 2001 capital increase does not qualify as funding from State resources as at the time Fraport was an independent incorporated company under private law noted at the stock exchange and the public authorities were exercising no continuing control over its funds.

(309)

According to the case law, resources of an undertaking are to be considered State resources if the State is capable, by exercising control over such undertakings, to direct the use of their resources (55).

(310)

The Commission considers that in the present case, the State at all material times exercised direct or indirect control over the resources under consideration. The Commission notes that, at the moment the 2001 capital increase was irrevocably decided, Fraport was a company that was in majority publicly owned. Before 11 June 2001, public shareholders held 100 % of Fraport's shares (56). On 11 June 2001, Fraport was listed on the stock exchange and 29,71 % of its shares were sold to private shareholders. Afterwards, Land Hesse held 32,04 % of the shares, Stadtwerke Frankfurt am Main GmbH (100 % owned by the municipality Frankfurt am Main) held 20,47 % of the shares and the Federal Republic of Germany held 18,32 % of the shares.

(311)

Hence, between 11 June 2001 and 26 October 2005, 70,29 % of Fraport's shares were held by public shareholders and as such would qualify as a public undertaking within the meaning of Article 2(b) of Directive 2006/111/EC. Also, the majority of Fraport shares held by public bodies meant that these were in a position to exercise a dominant influence over Fraport.

(312)

Thus, the Commission considers that any capital injection granted from Fraport's resources would signify a loss of State resources, thus constituting a transfer of State resources.

Imputability to the State

(313)

However, the Court has also ruled that, even if the State is in a position to exercise control over a public undertaking and its operations, actual exercise of that control in a particular case cannot be automatically presumed. A public undertaking may act with more or less independence, according to the degree of autonomy left to it by the State.

(314)

Therefore, the mere fact that a public undertaking is under State control is not sufficient for measures taken by that undertaking, such as the funding provided to FFHG through the 2001 capital increase, to be considered as imputable to the State. It is also necessary to examine whether the public authorities must be regarded as having been involved, in one way or another, in the adoption of this measure. On that point, the Court indicated that the imputability to the State of a measure taken by a public undertaking might be inferred from a set of indicators arising from the circumstances of the case and the context in which that measure was taken (57).

(315)

Such indicators can be the integration of the undertaking into the structures of the public administration, the nature of its activities and the exercise of the latter on the market in normal conditions of competition with private operators, the legal status of the undertaking (in the sense of it being subject to public law or ordinary company law), the intensity of the supervision exercised by the public authorities over the management of the undertaking, or any other indicator showing, in the particular case, an involvement by the public authorities in the adoption of a measure or the unlikelihood of their not being involved, having regard also to the compass of the measure, its content or the conditions which it contains (58).

(316)

As stated in recital 135 and the following, Germany submitted that the measures taken by Fraport in relation to Frankfurt Hahn airport were not imputable to the State. In this regard, Germany referred especially to §76 of the AktG and to judgments under German law according to which the management board of an Aktiengesellschaft has a large discretion to act with regard to the day-to-day business of the company and insofar acts independently of its shareholders.

(317)

Germany also referred to a judgment of the German Federal Court, the Bundesgerichtshof, in which that court noted that the public shareholders were not able to have an influence on individual decisions taken in day-to-day business, but could only provide the general framework and guiding supervision of Fraport. According to Germany, this special nature of the Aktiengesellschaft was also recognised in relation to EU public procurement law in the Court's judgment in case Stadtwerke Brixen AG  (59).

(318)

Therefore, as regards the involvement of the public shareholders in the decision-making at the general meeting of shareholders, Germany argued that a vote by the meeting of shareholders did not constitute anything more than a mere exercise of their lawful rights and obligations as shareholders. Germany also rejected the notion that any of the other indications from the Stardust Marine judgment, mentioned in recital 315, were present.

(319)

As a preliminary remark, the Commission points out that the fact that a State owned company is a company incorporated under private law alone cannot — having regard to the autonomy which that legal form is capable of conferring upon it — be regarded as sufficient to exclude imputability of its actions to the State (60). No distinction should be drawn between cases where aid is granted directly by the State and cases where it is granted by public or private bodies established or appointed by the State to administer the aid (61).

(320)

In addition, the Commission notes that the judgment rendered by the German Bundesgerichtshof in 1999 (62) concerns criminal proceedings. In those proceedings, the question at last instance was whether a former employee of Fraport could be charged with the offence of ‘corruption of an employee’ or ‘corruption of a public official’, so the question arose whether Fraport was to be viewed as an ‘other administration’ according to the German criminal code (63). Therefore, the case is in no way connected to the question whether an action of Fraport can be seen as imputable to the State under State aid rules, but only clarifies that an employee by Fraport is not a public official and Fraport cannot be considered as part of the public administration in the meaning of the German criminal code.

(321)

Also as concerns the other judgment of the Bundesgerichtshof presented by Germany (64), the Commission notes that that judgment, as the case of Parking Brixen  (65), concerned the criterion of public control over an undertaking in the sense of Union public procurement rules. It does not concern the question of imputability under State aid law.

(322)

Furthermore, while it may be that the management board of an Aktiengesellschaft can act independently of its public shareholders when day-to-day business decisions are taken, because of its shareholder structure (with 70 % of its shareholders being public) and the consortium agreement between its public shareholders Fraport nevertheless considers itself as a ‘dependent, publicly held undertaking’ (66) (as reported in each annual financial report between 2001 and 2006).

(323)

Moreover, several factors indicate that the 2001 capital increase is in fact imputable to the State.

(324)

First of all, the Commission considers that the 2001 capital increase cannot be considered out of context, but must be viewed in the light of the political and legal situation of Fraport at that time. Those circumstances and facts clearly indicate that the measure would not have been adopted but for the involvement of the State.

(325)

According to the minutes of Fraport's supervisory board meeting on 26 September 1997, the authorities of Land Rhineland-Palatinate offered Fraport to become involved in Frankfurt Hahn airport, since ‘Land Rhineland-Palatinate wished, through the involvement of [Fraport] in [FFHG] to strengthen the development of employment opportunities, and since it expected an increase in air traffic’. After Fraport had become a shareholder in FFHG with a share of 64 % on 1 January 1998, according to the minutes of the supervisory board meeting of 10 May 1999, ‘the government of Land Rhineland-Palatinate [has] turned to the prime minister of Land Hesse with the request for a stronger commitment of [Fraport] at Hahn [airport]’. For this purpose, Fraport was to take over the shares which Holding Hahn and Weiss and Freytag still held in the airport (see recital 17). The minutes state furthermore that Fraport should not be penalised ‘if it does not reach regional political goals, e.g. number of employment opportunities’ and that ‘the negotiations between Fraport and the Land about points of discus